Finding bulk freight capacity is easier now, but for how long?

After enduring historically tight capacity markets in the wake of the pandemic, shippers are experiencing a welcome respite. Finding bulk freight capacity is easier now than it has been in years. In this article, however, we’ll explain why this seemingly positive news may not be as good as it seems.

The current bulk freight market

Capacity has eased across all modes of trucking. In the dry van world, for example, Freight Waves reports that tender rejections have reached an all-time low of 2.53%. When the rate of tender rejections is high, that means that trucking carriers are receiving more shipments than they can handle – and can be selective in what they choose to haul. Conversely, when rejections are low, carriers are much less selective and will accept most shipments.

Bulk trucking is much more specialized of course, but there are currently market similarities and bulk capacity is easier to book.

The main causes for this include a balancing of inventory levels among manufacturers. They’re no longer desperately trying to catch up to fill existing orders like they were at the start of the pandemic. Nor are they building mountains of excess inventory like they were the past few years.

There is also uncertainty about the direction of the economy. Most companies are playing it safe and watching the markets before going full bore with manufacturing output again.

All this is to say that there is currently more bulk trucking supply than there is demand.

Can the industry sustain a lengthy shippers’ market?

The simple answer to this question is “no.”

When capacity is readily available, carriers must charge less for their loads to remain competitive. They therefore are making less money. This is especially problematic when (a) operating costs remain very high, and (b) many carriers spent a lot of money bringing on new drivers the past few years when competition for drivers – especially bulk drivers – reached a fever pitch.

With these factors in mind, a prolonged shippers’ market will lead to the following undesirable events.

1. Smaller bulk trucking companies will leave the industry. If the costs are unsustainable, many companies will be forced to cease operations. In the bulk industry in particular, there are many smaller carrier companies formed by groups of experienced drivers who banded together and got their own operating authorities. If such companies leave the industry, there will not only be a loss of carriers, but also (likely) a loss of experienced drivers as well.
2. Larger carriers will have layoffs. Carriers across all modes of trucking did everything in their power to bring on drivers in the wake of the pandemic. Some large bulk trucking companies even had to bring on less qualified drivers that may not have made the grade during more ‘normal’ market conditions. If load volumes continue to decline, these carriers will begin laying off drivers, starting with those brought on the last few years.

The result of each of these events is fewer bulk freight drivers on the road. Fewer drivers on the road means tighter capacity and higher rates all over again.

A word about bulk freight rates

As finding bulk freight capacity is easier, shippers expect to pay less for that capacity. And, while spot market rates for bulk shipments are lower, the easing of rates isn’t as pronounced as it is with dry van and other forms of trucking.

The reasons? First, the volumes handled by local/regional bulk carriers has remained pretty consistent. They haven’t been affected by current market conditions the same way that larger national carriers have. As a result, rates from these carriers aren’t going to be dramatically lower than they were in mid-to-late 2022.

And even though the larger national carriers have been hit a little harder, their rates haven’t dropped as much as you might expect. If the loads aren’t there, there aren’t as many drivers (and equipment) on the road. With less equipment on the road, the carrier’s dispatchers have limited options in terms of making trucking lanes work economically for them.

National carriers make their money by matching outgoing loads with incoming loads within a given lane, so that the amount of ‘empty miles’ that each driver travels is substantially limited. This isn’t always possible in the current climate. And when it’s not, the rates will remain relatively high.

A word about bulk freight brokers

We’ve all dealt with many “new” things since the start of the pandemic. One of the riskiest of those new things for bulk shippers is the influx of new bulk freight brokers into the market.

When the trucking industry was turned on its head the past few years, several dry van freight brokers decided to throw their hats into the bulk freight arena – while largely operating as though there wasn’t much of a difference between the two modes.

We all know that there’s a big difference. But, if the freight broker handling your freight doesn’t fully understand that – and doesn’t have the experience to ensure the safety of your products and the public at large – then it can be a dangerous situation.

We’re seeing some brokers post loads exclusively on load boards, which leaves little to no room for all the important details of a bulk load to be hashed out. We’re also seeing a lot of ‘too-good-to-be-true’ pricing – sometimes lower than the actual cost to the carrier of hauling the product. Unless there are suddenly not-for-profit bulk carriers out there (we assure you, there’s no such thing), then something is wrong.

Now, this is not to say that all new brokers are bad brokers. But there are signs of reckless or incompetent behavior that can only lead to danger down the road.

If you are looking for guidance in separating the true pros from the pretenders in the world of bulk freight 3PLs, check out our recent article: “How to find the best bulk freight brokers.”

Or, better yet, drop Bulk Connection a line to learn how we can put over 35 years in the bulk freight industry to work for your operations – no matter how tight capacity is.