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Trucking Bankruptcies, Pricing Edge Up
Tuesday, 08 December 2009 00:00
Sequential increase in third quarter failures points to firmer pricing, Avondale Partners says

Trucking bankruptcies are beginning to climb again, putting upward pressure on rates just as shippers prepare contracts for bidding in the first quarter of 2010.

The number of motor carrier bankruptcies rose 8.6 percent from the second quarter to the third as 405 companies shut down, said investment banking firm Avondale Partners.

The number of trucks pulled out of service more than doubled from quarter to quarter, rising from 6,725 to 14,135, Avondale said. The average fleet size of the carriers that closed rose from 18 to 35 trucks.

That hardly put a dent in the glut of excess capacity, however, taking only 0.7 percent of the nation’s heavy truck capacity off the highways, the firm said.

But Avondale Managing Director Donald Broughton predicts the number of trucking failures will rise next year and truck pricing will move up. The firm’s spot market index, after falling to record lows, “has recently begun to rebound,” he said.

Trucking executives report tighter capacity, more shipments and firmer rates, as retailers replenish inventories cut to the bone over the past two years.

“I’m seeing pricing stabilize,” said Herb Schmidt, president of Con-way Truckload, Joplin, Mo. “There are fewer carriers competing for the same pot of freight.” As a result, "pricing traction has returned a little, tiny bit," he said. "The first quarter will tell a huge story."

It may be a tale of higher truck rates. Broughton expects carrier pricing to gain momentum and continue into 2011. “We advise shippers to lock in pricing as long as possible,” he said.

Journal of Commerce Online, 12/8/2009