Oversupply hinders trucking growth

Trucking industry softens with overcapacity

Motor & Fleet

By Allie Sanchez

Insurers may take a hit from the doldrums in the trucking market, with the reported glut in the industry.

Penske Logistics said that there is an estimated oversupply of 80,000 trucks currently plying US roads.  

This may be caused by soft demand for freight services, with long haul freight rates falling 1.2% in May year on year following two consecutive months of a drop in prices, Cass Information Systems, Inc. said.

Shipper negotiations have also resulted in more than 10% rate reductions, which means trucking businesses, are operating at a loss. Similarly, one time freight rates have been falling since early last year.

Stock market bellwether Werner Enterprises, Inc. also reported lower earnings, causing the trucking market to plunge. The company said soft demand, rising driver pay and other factors led to lower share earnings.

Historically, trucking companies report higher earnings in the second quarter of the year as costs associated with winter operations recede. Analysts said the doldrums could spark a downtrend in the trucking industry.

While demand for insurance is constant as it is an operational necessity, the lower volumes could affect premium payments, with fewer trucks running the roads.

Demand for freight services is expected to catch up later in the year towards the start of next year.
 

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