Loaded and Rolling: Owner-operator survey data; MC number cancellation data

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FreightWaves owner-operator survey data

(Source: FreightWaves Research — June 2022)

FreightWaves recently conducted a survey of owner-operators outlining business issues and outlooks on profitability in 2022 compared to the previous year. The survey included 76 owner-operators and a majority of those polled, about 70%, hauled dry van trailers.

What stood out most in the data was the reported worsening conditions facing owner-operators. Just over 35% of those surveyed indicated the lowest possible score, a 1 out of 10. If we add all responses rated from 1 to 5, indicating less profitable expectations for the year, then 81.57% believe they will earn less money in 2022.

Regarding major issues impacting owner-operators’ businesses, Joe Antoshak, senior editorial researcher at FreightWaves, wrote, “The biggest reason for pessimism appears to be this year’s meteoric rise in fuel costs. That option scored a high-weighted average of 4.61 — nearly three-quarters of respondents ranked it first. Owner-operators are significantly more exposed to fuel cost spikes than large carriers because they tend to have far less capital available for sophisticated fuel-hedging strategies.”

Antoshak added, “Rates volatility came in a distant second, with a weighted average of 3.67. It was followed by the availability of loads (3.04). Tolls and traffic, meanwhile, were far away fourth and fifth picks.”

Determining the trucking business environment for smaller carriers and owner-operators can be challenging. Compared to large, publicly traded trucking companies that report earnings reports, smaller carriers are often working with freight brokerages or smaller customers. Therefore survey data is an invaluable source of on-the-ground information regarding expectations, as a decline in their profitability will impact their business decisions, including partnering with a large carrier or even exiting the freight market altogether.

Motor carrier number cancellations increase in June

Net revocations of operating authority appear to be increasing, according to data from motor carrier cancellations in June from Trucking Register. An interesting note was that USDOT numbers continue to rise but MC, or motor carrier, numbers are declining. The image above shows the distribution of revoked MC numbers for the previous month by DOT fleet size group.

In an email to FreightWaves, Don Harvey and Bruce Butler with the Trucking Register noted, “Net growth in the number of new trucking companies continued strong in July. However, the subset of those with interstate authorities decreased. The revocation of MC#s exceeded the granting of new ones. This is not unheard of. Negative or near zero changes happen every few years. We will see next month whether this month confirms a trend.”

When talking about revocations of operating authority it’s important to know the distinction between a MC number and a USDOT number. First off, everyone needs a DOT number with some of the guidelines below:

Gross vehicle weight or gross combination weight of 10,001 pounds or more.
Commercial vehicles being driven on interstate routes.
Vehicles transporting nine or more people for compensation purposes.
Vehicles transporting 16 or more people without compensation purposes.
Vehicles transporting hazardous materials.

Where it gets interesting is if you want to haul things across state lines or get paid to haul goods, people or hazardous materials. For that, you need an operating authority from the FMCSA and they give you a motor carrier number. Typically you need an MC number if:

You are a for-hire company.
Are transporting goods or people for compensation.
Interstate commerce transportation companies.
Transporting goods or people regardless of compensation.

This explains why you will see construction companies with their own DOT numbers but not motor carrier numbers, as owning your own equipment to haul your own goods inside your state doesn’t count. Since you own the equipment and are engaged in commerce, you still require the DOT number. But if you have a tractor and trailer — and want to haul goods across state lines and get paid for it — you’ll need the MC number in addition to the DOT number. It can be confusing, but luckily the FMCSA has a super-detailed website full of nice legal jargon.

Overall, the large revocation percentage of MC authorities from carriers under 10 trucks continues to indicate that trucking capacity is either leaving the market or going to work for larger carriers as a contractor due to declines in freight volume and spot market rates.

Market update: ACT Research notes June trailer orders remain volatile

According to a recent report from ACT Research, June net U.S. trailer orders were 25,444 units, approximately 31% higher than last month, and up nearly 122% year over year. This data is part of the State of the Industry: U.S. Trailers report and is a monthly review that includes trailer OEM build plans and tracks the movement of the trailer market.

Jennifer McNealy, director of CV market research and publications at ACT Research, wrote in the report, “Order placement remained choppy in June, with dry van and bulk tank net orders sequentially increasing by double digits and responsible for the total industry uptick. On the other hand, reefers and flats saw double-digit drops compared to May’s net order levels.”

McNealy continued, “While some OEMs have opened part of their 2023 build slots, discussions indicate that others are holding to their plans to wait just a bit longer. Trailer manufacturers continue to face supply-side challenges, material availability and labor, but are now reporting improvements in both.”

I would predict pent-up demand to remain as large fleets placing new trailer orders in the thousands would want to lower the average age of their equipment. An interesting development to follow will be if they sell their older used trailers and if this will have a notable impact on used trailer prices, just as freight demand and rates continue to decline.

FreightWaves’ SONAR spotlight: Outbound tender rejection rates search for seasonality

Summary: Outbound tender rejection rates by mode continue to see downward trends across the board. What is notable are the recent declines in the flatbed segment, which saw rejection rates rise from around 6% beginning in the second half of 2021, topping out around 44% on March 6, then declining to 19% by Tuesday. The decline can be attributed to inflationary pressures from rising fuel costs and material prices impacted by geopolitical events. The decline in flatbed outbound tender rejections matches recent economic data showing declines in industrial orders and manufacturing activity. In addition, the rising reefer outbound tender rejection rates saw a similar trend due to lowered consumer demand, going from a three-year high of 50% around March 2021 to rapid declines beginning in January 2022 — moving from 42% the first week of the year down to 7.76% as of Tuesday. Given the rising cost of fuel and other transportation-related expenses, the next challenge will be determining what the pricing floor will be and if outbound tender rejection rates continue to decline as trucking pricing power is transferred from carriers to shippers.