With Capacity Tight, Is the U.S. Truckload Market More Volatile Than Ever Before?

June 24, 2021 / By Erika / Logistic • Shipping • Storage • Transport • Trucking / 0 Comments

Like many industries, the United States truckload capacity market moves in cycles of supply and demand, supply being the number of trucks and drivers that haul freight and demand being the demand for those trucks to meet the needs of the current market.

For shippers and brokers, the cyclical rise and fall feels perhaps even more exaggerated in recent memory, given the current COVID-19. In fact, at the end of Q4 in 2019, capacity started becoming tighter than anything we’ve seen before. And now that the economy is rebounding and business is booming for many industries, freight demand is gaining momentum. With an increase in consumer spending and difficulties in finding enough drivers, the capacity squeeze continues.

Another factor in the tight capacity is the low supply of available warehouse space caused by consumers spending on physical goods and companies holding more inventory. A report from CBRE states that we will see an increase to 26% of retail sales by 2025 in the U.S. and globally we will need an increase of 1.5 billion square feet to keep up with a $1.5 trillion uptick in e-commerce sales.

Imported cargo shipments to the U.S. are expected to remain at a record or near-record levels for several more months as consumer spending continues to restart the pandemic-damaged economy. But economists and other experts say that all of that buying is clogging an already overtaxed supply chain.

“I see the back half of the year remaining strong,” Port of Los Angeles Executive Director Gene Seroka said. “The peak season starts for us on August 1st for our back-to-school specials, fall fashions, and then the holidays. But we have to hustle; we still have some cargo in the back lot to clean up before we pivot to peak season.” The Port of Los Angeles reported five months into the year, overall cargo volume is 4,551,445 TEUs, an increase of 48.2% compared to 2020.

“Supply chains are finding it difficult to keep up with demand as shipping capacity struggles,” Hackett Associates founder Ben Hackett said. “A number of vessels taken out of service when volumes were low remain in dry dock while others are delayed in congested ports, which face a lack of manpower both because of COVID-19 illnesses and the tight labor market.

A Busy Rest of 2021 Ahead

As we move into a busy fall season and then into the holidays at the end of the year we could face more challenges. Some industries are seeing their defined peak seasons disappear as the e-commerce boom has caused them to have year-round demand. But, we will still see some seasonal increases in an already tight environment.

If the last two years have taught us anything, it is to expect the unexpected! Proper planning and working with trusted logistics partners can help ease any burdens we may face in the rest of the year.

See for yourself why businesses are depending on Westgate to improve their shipping processes and to keep them informed of industry trends. 

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