When shipping international cargo, the freight transportation industry is a major player. Looking into trends for the incoming year is always significant, as evolution of freight rates affects all of the key players in international trade. As a result, we’ve seen the trucking industry undergo a lot of change in recent years. The past year has seen trucking companies and drivers change how they operate due to instability of the market and rising fuel prices. The industry is always evolving, so it's important to stay on top of changes. A quick look at some of the forecasts for 2023 can inform drivers and companies on how they can prepare, and how to ride out the year with the greatest odds of success.
The freight transport industry is undergoing a lot of changes. Due to a combination of factors, including increasing inflation and the need for consumers to break spending habits, the economy is forecast to face challenges or at the least we may see a drop in consumer spending and thus freight rates, in the coming year. Based off multiple industry reports, including the latest ACT research report, it is notable to consider that a potential recession may become a factor in the industry in 2023. Trends would suggest that freight rates for highway, sea and air would be dropping from their pandemic highs. Drivers and smaller companies will need to adjust to a new routine and better ways of making profit.
There are a few industry trends we may notice in the new year, which will affect the transportation sector:
Ocean freight carriers have experienced high container rates in 2022, but these prices began to lessen toward end of the year. Global trade challenges and declining demand from Asia for bulk grain products contributed to shifts. We have seen a decrease in volume for bulk commodities and an oversupply of containers, which will suggest changes in price. Ocean volumes declined last month and this can be attributed to both China’s manufacturing and export activity as well as inflation and consumer demand shifts. These are trends which many experts are predicting will continue into 2023, indicating that prices will likely come down. We also have the Lunar New Year which will affect Asia’s manufacturing factories for multiple weeks in the coming year. This means we can expect potentially positive activity on the ocean front for the latter half or end of 2023.
Air freight is experiencing a similar turn to ocean carriers, as airfreight volumes have been dipping each month, for a consecutive period. November 2022 saw chargeable weight fall down 8% compared to the numbers the same month in 2021. The trend suggests that instead of seeing a boost in the late peak season, the instability of the market indicates we are going to witness freight forwarders waiting to see how things develop. The uncertainty suggests short-term contracts will be made, and some more hesitation will occur when it comes to committing to any long term deals.
Since trucks are the key to last mile delivery and quick freight transportation, the trends noted in trucking are essential for logistics professionals to take note of what they can anticipate. As of this being written, most experts are looking toward truckload volumes declining in 2023, due to the aforementioned manufacturing and global trade challenges.
When it comes to highway carriers, we are seeing freight prices dropping in the trucking sector, based on Arrive Logistics latest report on dry van and reefer rates for the coming year. When it comes to truckload and intermodal shipping, many experts are predicting that spot rates will remain stable for the most part in the coming year, with some drops in the first quarter of 2023, and then back up around summer. However, many are expecting a return to pre-pandemic levels. Freight capacity is still at a relatively available point. Since capacity is assumed easier to secure in 2023, shippers will likely be quieter during the slower season, unlike in the previous pandemic years.
Despite fuel cost instability, higher equipment prices, and potential recession risks; many carriers are expecting to return to pre-pandemic levels in 2023, due to large companies like Walmart and Target accounting for a significant portion of the carriers capacity, which results in prices remaining steady. To adapt, many owner-operators have taken jobs with larger fleets, meanwhile small carriers have had to shut down in recent months due to the market no longer being profitable for them. The rest are subject to potential acquisition in 2023, due to the volatile market.
We do not yet have a concrete idea on how fuel prices will impact trucking companies and shippers in 2023, as fuel prices are currently down from the highs of summer 2023, yet they remain about 30% higher than the previous year during this time. The likelihood is that diesel rates will go down in 2023, as U.S. Energy Information Administration is projecting $4.23 average in 2023. We can expect to see the higher prices early 2023, and then the rates drop as we move further into the year. Gas prices will no doubt continue to affect smaller carriers and owner-operator's bottom line.
The average consensus of the 2023 forecasts suggests that shippers can see positives in their air and ocean freight budgets, due to the drop in rates. Consumers as well will be benefitting due to potentially lower shipping costs in the coming year. The trends leave trucking companies and truck drivers needing to plan ahead and prepare for any potential instability. In 2023 we can expect that logistics will become even more important as a way to mitigate costs, while technology leads the way in terms of efficiency and cost effectiveness. However, smaller trucking companies and drivers can already make small changes in their routine as a way to maximize profit and efficiency in the coming year:
Network More and Solidify Your Relationships
Trucking companies of all sizes can benefit from improving relations with clients and staff in the coming months. Effective communication with clients, and taking in any reviews as tools for improvement can benefit any company in terms of progressing. Customer satisfaction is the number one way to retain and grow your client base, so ensure that you are providing transparency and reliability in your services. Utilize technology to provide clients with real time tracking, estimates and information they need. This is also a good period to work on building strong relationships with brokers and shippers, because you will want to have a client base to continue working in unreliable times.
Consider The Contract Market
Spot rates may continue to decline in the next few months, but owner-operators can also potentially take their work to bigger fleets under contract work as a solution. This allows for drivers to temporarily make money, while still remaining an independent entity.
Emphasize Your Cost-Per-Mile
Maintaining and regularly updating your cost-per-mile is going to be essential in managing costs very carefully in the coming year. Often drivers or companies will look at their cost per mile and look at fuel costs, salary and then discount the other associated costs. Make sure that you are regularly updating your cost-per-mile calculations and accounting for other variable and fixed costs. You should be updating your cost-per-mile on average once (1) a week, and adding small changes where you see fit in terms of your practices so that you can stay on track with your financial goals.
Fixed Costs Can Be:
However, you have more room to play with your variable costs and save money. You may consider variable costs to be:
It is important to regularly maintain and inspect your truck and tires, in order to save money on bigger repairs. Look at how much you may idle and where you may be losing money in some of these variable costs, in order to make the most of your profit. You may consider fuel programs, and focus on finding the right fuel provider for your business. Do not cut maintenance repairs thinking you can put them off for later, as this can become a bigger and more expensive problem. Instead when possible, try to pay off your other debt, so that you can eliminate the interest rates.
Maintain A Clean Driving History
A clean driving record is going to save you both money and time in a year where prices could be fluctuating or changing. Since CDL drivers are held to a higher standard federally than regular vehicles, keeping a clean record is important for business. ELD mandates are also becoming enforced in Canada beginning in 2023, so it is even more important to adhere to regulation as a driver. Clients and companies are more likely to work with drivers who have a clean record, and you are more likely to get high quality and higher paying jobs the better your record is.
Use Technology To Your Advantage
Technology is going to bring about big changes in the industry in 2023, but truck drivers can also take advantage to simplify things for themselves. With instant access to trucking rates (Using TruckStop and DAT for example), technology provides an advantage in rate negotiations. Drivers can also use these types of services or technology to schedule loads ahead of time instead of working load to load. Using a platform like Zipments.io, you also have access to real-time tracking in cross-border trips, PARS/PAPS labels and all the necessary forms. Drivers and carriers are now privy to the same information that brokers and shippers have, so it is an essential tool in managing your business successfully.
It is not easy for a truck driver to survive in today's trucking market. Trucking is a tough business but you can make it a little easier on yourself by adapting to some of these initiatives to stay running in the new year. One of the biggest challenges facing trucking companies is managing their fleet. But it's not all doom and gloom; knowing how to utilize technological tools and plan ahead can help drivers retain their jobs and much of their profits in the year to come.