Truck Competition

[zardoz]

Shadow the Cats owner

First off trade or sell of the oldest equipment faster......We can keep the trailers a year longer if we can retire those 2016 model trucks this year

So soon we'll be seeing a long line of not-so-old Peterbilts waiting for a buyer or user, just like that long line of UP locomotives in Arizona.

https://www.youtube.com/watch?v=FZ36yCvFzMk

or

https://www.youtube.com/watch?v=TQ5UN1DmA8Q

 

[Shadow the Cats owner]

What carriers do in a situation like this is 3 things.  First off trade or sell of the oldest equipment faster especially with the modern emissions control equipment on the stuff.  2nd we concentrate on our contracted shippers and recievers making dang sure we keep them happy and avoid losing them to someone else.  Lastly we watch our bottom lines by hedging fuel costs watching where and how much fuel we buy in certain states that cost us more to buy fuel in overall.  We may feel a pinch in profits for a quarter or so however we will be fine.  We can keep the trailers a year longer if we can retire those 2016 model trucks this year and finish driving out a mega carrier out of town that is about gone.  

[greyhounds]

There's an interesting article in the Wall Street Journal (paywall) about the truckers.

https://www.wsj.com/articles/truckers-wrestle-with-oversupply-of-big-rigs-falling-freight-rates-11564311602

During last year's freight boom they ordered a lot of new power units.  The manufacturers were backlogged so much of the new power is just getting delivered now.  The problem is they don't need it now.  The freight market has gone soft.  

So, new capacity it coming on line in a soft demand period.  This is driving freight rates down.  According to DAT the average spot market rate for a dry van is down 18.5% from 2018.  The truckers' earnings are taking a hit because of this.

Unless they can somehow get out of their order they've got to take the trucks and they've got to pay for them.  So, they bid down their rates to get some money, any money.  There's no way to pay for a truck that sits still.

This is a big factor for why rail intermodal volumes are down.  If I was doing the railroad's intermodal pricing I'd stay right with 'em.  The railroad's marginal costs are lower than a trucker's marginal costs.  And that means they shouldn't be able to beat a railroad on price.  (Given a reasonable intermodal lane.)

The railroad will take a hit with the lower prices, but that's the current market.  It beats maintaining the current price and having idle equipment and unused track capacity.  These two things bring in no money at all.  And their costs just keep on going.

But I ain't in charge.