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November 25 2019

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36 The Journal of Commerce | November 25 2019 Surface Transportation LARGE TRUCKLOAD CARRIERS reduced their overall number of trucks in the third quarter, but not enough to affect the current oversupply of truckload capacity. The JOC Truck- load Capacity Index (TCI) dropped 40 basis points sequentially in the third quarter to 86.3 percent, after falling twice as far in the second quarter. That deceleration may indicate truckload executives believe the freight market has hit bottom; some are positioning their companies and fleets to handle higher demand in the fourth quarter and potentially in 2020. "Even in bad markets, from third to fourth quarter you see demand increases, simply because Christmas is coming," Derek J. Leathers, presi - dent and CEO of Werner Enterprises, said in an Oct. 24 earnings call. Other sources don't expect much change in supply and demand until the second half of 2020, meaning shippers would continue to hold pricing lever- age when negotiating 2020 contracts. The JOC TCI does confirm large publicly owned carriers have slammed the brakes on their rapid fleet expan- sion of 2018, which drove the index reading above 80 percent for the first time since 2016. The JOC TCI carriers, which operate more than 23,000 Class 8 trucks, increased their combined tractor count only 0.7 percent year over year in the third quarter, compared to an annualized tractor count increase of 9.1 percent in the first quarter. Truck capacity is leaving the broader market, based on the number of trucking bankruptcies reported, Leathers said. "It's starting to become apparent that these trucks are leav - ing, and that these rate structures are not sustainable." It's not clear where those trucks are going, however. Used equipment from bankrupt companies typically is sold at auction. That capacity eventually re-en- ters service under different ownership. "We don't see that there's really a lot of capacity that's exited the marketplace," Landstar System's vice president and chief safety and opera- tions officer, Joseph Beacom, said Oct. 24. "I just think that the need to reach out further and find the capacity that's there is less, because demand is down." Landstar's truck count fell 1.4 percent sequentially in the third quarter. A sharp U-turn The truck capacity U-turn motor carriers made in 2019 was both sudden and sharp. The 7.1-point jump in the TCI in 2018 was the steepest accel- eration for the capacity barometer at any time since the 2008–09 recession. From Q1 2014 through Q1 2016, the index rose 6.1 percentage points, from 73.9 to 80. During the slow freight economy of 2016 and early 2017, the index remained relatively flat until it accelerated 3.3 percent in Q2 2018. After more than 10 years of eco- nomic recovery, the combined tractor WITH THE DEADLINE for the second and final phase of the United States electronic logging device (ELD) mandate looming in December, US regulators are giving a second hearing to a petition that would exempt trucking operations with fewer than 50 employees from the federal rule. In an Oct. 29 Federal Register notice, the Federal Motor Carrier Safety Administration (FMCSA) said it would reconsider the petition from the Small Business in Trans- portation Coalition (SBTC) that it denied in July. The FMCSA requested comments on the petition by Nov. 29. Publication of the notice reopened the books on the peti- tion, immediately drawing online comments, mostly in favor of the pro- posed exemption but some calling for elimination of the mandate, or even an end to hours-of-service regula- tions. Other commenters complained of being detained by shippers. The class exemption sought by the SBTC would cover the majority of motor carriers, most of which operate fewer than 20 trucks and have less than 50 employees. It would in effect create two classes of truck drivers, with most being allowed to use paper logs rather than ELDs. That type of division is something the FMCSA has opposed since it promulgated the ELD rule. The final ELD deadline falls on Dec. 16, two years after the rule took effect and four years after it was orig- inated. At that point, motor carriers operating older automatic onboard recording devices (AOBRDs) will have to switch to new devices that meet FMCSA's ELD standards. The trucking industry is busy working to meet that challenge and avoid the disruption that occurred in early 2018 after the ELD mandate was introduced. The mandate combined with higher freight volumes to immediately constrain truck capacity, pushing up spot rates. It's considered unlikely the FMCSA will reverse course and grant a broad exemption, but the SBTC petition is drawing attention to issues such as detention time and delivery demands that can't be met within legal hours and highlighting research suggesting a link between the ELD mandate and higher unsafe driving violations among small trucking firms and owner-operators. The same research, however, found the ELD mandate has improved hours-of- service compliance. Trucking | Rail | Intermodal | Air & Expedited | Distribution Positive attrition Truck capacity 'correction' changes little for shippers By William B. Cassidy Pullback petition ELD rule challenge resurfaces at FMCSA By William B. Cassidy

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