NEW YORK A rash of recent bankruptcies in the trucking industry has shippers concerned that domestic freight rates, which have surged over the past 12 months, could push even higher through year-end.
More than 10,000 trucks were taken off the road in the first quarter as a result of bankruptcies, according to Donald Broughton, chief market strategist at Nashville, Tenn.-based Avondale Partners LLC.
"Companies that were formerly financially stressed have become even more financially stressed and are exiting the industry," Broughton said Aug. 20 at the annual Commercial Vehicle Outlook Conference in Dallas. "Its bad news for the industry, its bad news for capacity and bad news for those business owners who spent lifetimes building those businesses."
In recent months, several major carriers have closed their doors, citing funding problems and issues related to increased government regulations.
New Century Transportation Inc., which reported $267 million in revenue last year, filed for Chapter 7 bankruptcy liquidation in June, noting widespread liquidity issues. The Westampton, N.J.-based company was the 45th-largest truckload carrier in the United States and Canada, according to Transport Topics, a trade journal covering the trucking and freight transportation industries.
Tucker, Ga.-based Drug Transport Inc./DTI Logistics Inc., a full-service transportation and logistics company, filed for Chapter 11 bankruptcy protection this month after the companys lender, Branch Banking & Trust Co., filed a complaint seeking the appointment of a receiver and recovery of more than $7 million, according to court filings.
Rapid consolidation within the trucking industry has caused increased capacity restrictions and widespread rate increases, metal industry sources told AMM. The increases come during a period of unprecedented demand for material traditionally shipped via truck, including nonferrous scrap and finished aluminum products.
Bob Costello, chief economist of the Arlington, Va.-based American Trucking Associations (ATA), last month noted freight volumes had risen 2.5 to 3 percent, their best year since 2010 (amm.com, July 17).
Capacity restrictions, largely caused by stepped-up demand and industry consolidation, have led to fierce bidding wars among shippers.
"There are fewer carriers and less drivers in the U.S., and there is a widespread belief that companies that are still around think they can charge whatever they want. ... The whole thing has been very problematic for us this year," one primary aluminum seller said.
"We are fundamentally at $2.50 to $3 per mile; 12 months ago it was at $1.50 to $2," one scrap shipper said, adding that he had seen rates as high as $4 per mile for specialized routes.
"Also, we are seeing more and more cozy relationships from the major suppliers, partially resulting from the consolidation within the industry. Some of the bigger buyers only allow us to ship with certain carriers, which can really cause problems for getting competitive quotes," he said.