Freight Growth Seen Despite Driver Woes; Government Turns Attention to Regulations
Trucking companies are likely to see a continuation of moderate business growth in 2016 as the shortage of qualified drivers keeps a lid on fleet expansion, analysts said. On government issues, with a new highway funding plan signed into law, limited action is expected in Congress during a presidential election year, and industry officials said they are turning their attention to regulatory activity at the federal and state levels.
“It’s going to be a heavy regulatory year,” said Dave Osiecki, chief of national advocacy for American Trucking Associations.
The Environmental Protection Agency and the National Highway Traffic Safety Administration have said they will announce a final rule by midyear on the Obama administration’s plan to tighten greenhouse-gas emissions for tractor-trailers.
Among the other notable items expected in 2016 is a final rule on drug and alcohol test results, currently set for publication in mid-April, according to the U.S. Department of Transportation’s most recent regulatory update. Under the rule, the Federal Motor Carrier Safety Administration would establish the clearinghouse to include all positive drug and alcohol tests and require prospective employers to query the database before hiring a driver.
Also, the comment period for FMCSA’s safety-fitness determination proposed rule is scheduled to end in March. The proposal was cleared by the White House Office of Management and Budget in December. FMCSA is expected to propose adopting revised methodologies, largely using Compliance, Safety, Accountability scores, to help determine if a motor carrier is fit or not fit to operate trucks in interstate commerce.
A rule requiring speed limiters on new heavy-duty trucks and FMCSA’s proposed entry-level driver training rule still were under review by OMB as of press time. The request for the speed-limiter mandate dates to 2006, when ATA and Roadsafe America sent petitions to the government calling for adoption of the requirement.
This month, FMCSA is expected to publish a notice saying it wants to collect data concerning the prevalence of obstructive sleep apnea among truck drivers so that agency personnel can consider how to write a rule on the subject. The request also will seek information about the potential economic effects and safety benefits associated with such a regulation.
Another change coming this year is implementation of a new uniform registration system for carriers. Under the new system, FMCSA will assign U.S. DOT numbers to both for-hire and private carriers, and eliminate the use of motor carrier operating authority numbers to identify for-hire common carriers. The new system is expected to be in place by September.
On Capitol Hill, Republican leaders are likely to schedule hearings on top trucking- and transportation-related nominees from the Obama administration. Key among them will be Scott Darling to lead FMCSA.
Darling was nominated in August to be administrator, and a few weeks later, he presented the Senate Commerce Committee answers to a comprehensive questionnaire.
Republican transportation policy-makers also indicated the White House should anticipate much more scrutiny during the final year of Obama’s presidency. Lawmakers are planning to engage in a robust watchdog role over the administration’s implementation of the highway funding law as well as his climate and environment agenda.
After another strong year in 2015, expectations for sales of new trucks and trailers are mixed going into 2016.
Frank Maly, an analyst with ACT Research Co. in Columbus, Indiana, said he sees an emerging “disconnect” between tractor and trailer sales.
Six of the top 10 strongest order months for trailers have occurred since October 2014, according to ACT data.
“Although the trailer market continues at a solid pace,” Maly noted, “the tractor market has registered a noticeable slowdown in orders, and considered in tandem, this disconnect is somewhat disconcerting.”
Maly said large fleets are driving demand for trailers, while vocational segments “continue to be challenged.”
A report by the Equipment Leasing and Finance Foundation forecasts an increase in equipment and software investment of 4.4% in 2016, with spending on trucking equipment remaining “steady.”
Jonathan Starks, director of transportation analysis at FTR Associates, said while he sees a slowdown in orders for new equipment from truck fleets, he doesn’t see a downturn in the offing.
“It is a good sign that the economy continues to grow, and this weakness shouldn’t persist,” he said.
Too much growth, in fact, might not be such a good thing, Starks noted, because it would mean that new federal regulations coming in 2016 and 2017, such as the electronic logging mandate, would have an even greater effect on freight-hauling capacity.
To alleviate capacity concern, many shippers have begun to move business from the regular for-hire market and into dedicated and private fleets for critical shipments, and using rail intermodal for longhaul shipments, said John Larkin, a stock analyst for Stifel, Nicolaus & Co. in Dallas.
These moves, combined with sluggish demand in 2015, simply may postpone the day of reckoning and what Larkin likes to call “the mother of all capacity shortages.”
The year ahead for trucking looks “solid,” said Greg Secord, CEO of Comdata Corp., a unit of Fleetcor Technologies and a company that markets a card used by about 10,000 fleets to buy fuel and transfer payroll funds to drivers.
In April, the newly expanded Panama Canal is expected to receive the first of many supersize containerships that are expected to carry goods to ports along the U.S. Eastern Seaboard and Gulf of Mexico. The larger ships will reduce shipping costs for consumer goods and could divert freight from West Coast ports.
The expansion of the Panama Canal also is expected to boost demand for warehousing and distribution at key ports, said Craig Meyer, president of industrial brokerage at JLL Americas in Chicago.
“All indicators point to demand outpacing supply in 2016, with a continuing drop in vacancy rates to new all-time lows,” Meyer said.
In the United States, industrial production and energy will face headwinds in 2016 as the rising value of the U.S. dollar crimps exports of manufactured goods and low oil prices dampen domestic drilling activity. However, the overall outlook remains positive, FTR’s Steve Graham said.
“The outlook for the economy depends on the consumer,” he said.
Graham noted that with continued employment growth, rising wages and low gas prices, there is plenty of support for consumer spending in 2016.
“Household wealth has been rising, and consumer balance sheets are about as good as they’ve ever been,” he said.
Graham projects overall U.S. economic growth of 2%, which continues a sluggish pattern since the end of the recession but also has some advantages.
“The slow rate of expansion prevents imbalances in the economy and may put the next recession well into the future,” he said.
