OOIDA Foundation: Overcapacity led to falling freight rates in 2019

After a record-breaking year for owner-operators in 2018, freight rates saw a significant decline due to overcapacity, according to a survey published by the OOIDA Foundation.

The Foundation’s 2019 Freight Rate survey found that markets reached record highs in June 2018 before beginning a period of slow contraction that lasted through 2019. Rates dropped 27% from that June 2018 peak to December of this year. That decline does not include fuel surcharges.

The survey notes that 2018 saw owner-operators experience a 12% increase in per-mile pay.

“In 2019 however, the trucking industry experienced an oversupply of truckload capacity, which effectively drove rates downward for much of the year, albeit not below 2017 levels, and helped to create a freight recession scare,” the survey states.

One area where the survey found 2019 had lagged behind even 2017 levels was orders for Class 8 trucks.

“While 2018 shattered a 14-year industry record for Class 8 truck orders with 482,000 units, according to Bloomington, Ind.-based FTR Transportation Intelligence, and 490,100 units, according to Columbus, Ind.-based ACT Research, orders in 2019 were well below these figures, even falling below 2017 levels,” the survey states.

In addition to falling rates, the survey found that operating costs continue to climb. The survey found that the average operating ratio for company fleets and leased fleets pulling dry van equipment in 2019 has been 97.8, with a maximum of 101.6 in February, indicating a weaker economic period. Larger carriers in particular, according to the report, were barely making a profit through most of this year. This in turn has led to numerous bankruptcies and failures, with 800 carriers going out of business this year – compared to 310 in 2018.