E-scrap companies see ‘large swings’ in trucking market

A driver shortage that was exacerbated by the COVID-19 pandemic will continue to create challenges for moving used electronics and other recovered materials this year, analysts say.

Freight market research firm FTR Intel recently shared insights covering the trucking market during the pandemic and how some of the challenges of the past year will be around for months to come.

Trucking activity dropped dramatically in March 2020, when COVID-19 restrictions and associated impacts began to spread across the U.S. Overall freight volume is still down compared with pre-pandemic levels, and FTR doesn’t anticipate the freight activity will recover fully until mid-2021. That’s largely because of wider economic impacts from the pandemic on a number of business sectors.

But one figure has surged above pre-pandemic levels, and it’s an important one for recycling firms seeking transportation to move recyclables. Active truck utilization, which is the share of trucks engaged in hauling freight, is “far above” February 2020 levels, said Avery Vise, vice president of trucking for FTR.

“While freight demand has not fully recovered, driver capacity is much tighter than it was,” he said, noting that payroll employment in the trucking industry is down 3% from February 2020.

Electronics recycling facility operators say the freight situation has been turbulent for much of the past year.

“Since the start of COVID, there has been large swings in access and pricing for logistics across the country,” said Jeff Gloyd, vice president of sales and marketing for Universal Recycling Technologies (URT), a processor with four U.S. facilities. “We continue to have issues and have developed a large list of vendors in order to support our customer’s needs.”

Another facility operator said there has been pressure in all sectors of the trucking industry.

“We have seen increases across the board: full truck, LTL [less-than-truckload] and package delivery,” said Craig Boswell, president of Texas-based HOBI International. “We are being told it is a capacity issue driving up costs.”

Processors sound off on freight pressure

Steve Kalter, logistics manager for ARCOA Group, described numerous factors converging to create a challenging market for securing freight. ARCOA operates facilities in Illinois, Ohio and Wisconsin.

“We have seen increases for our local and regional truckload moves,” he said. “Some of our larger carriers were steadily increasing rates and then overnight jumped as high as an additional 40% for the same lanes. The issues are vast. Amazon, COVID, driver shortages due to COVID, and insurance increases.”

The driver shortage has created a situation in which freight operators are able to pick and choose jobs, as the transportation demand outpaces supply.

“Drivers are just passing on loads or, after committing to a run, dropping off for a higher paying one,” Kalter said.

Freight customers should expect problems and additional fees and get creative to handle them, he added. Staying in close touch with freight operators is particularly important during the current turbulence.

“Communication is key – sharing the rates and details to operations and sales for planning purposes matter now more than ever,” he said. “We have had better luck scheduling our [truckload] moves with smaller, family-owned companies rather than larger, better-known ones. Asking what a carrier’s sweet spot is for rates and lanes helps.”

Dean Snitker, manager of global accounts and transportation for HOBI International, said it’s important for freight customers to “aggressively quote out shipping lanes with a variety of carriers to fend off rising prices.”

“Most importantly, understand your client [and] resources and don’t be afraid to think outside of the box to create cost effective logistics solutions,” he said. “If an organization becomes lethargic in any form of business, not just logistics, inefficiencies and rising prices will hamper your bottom line.”

Another company has found relative stability – in part by concentrating business in a small number of freight vendors with which it has built long-term relationships.

“It’s been fairly static on our end we think in terms of pricing,” said Eric Ingebretsen,  chief commercial officer for TES, an ITAD firm with U.S. locations on both coasts. “We only use two carriers and our spend with those carriers is significant, which I think gets us some priority.”

‘Extraordinary pressures’

With fewer available drivers comes less available trucking supply, meaning higher prices and potential disruptions in trucking availability may continue this year.

“We have some extraordinary pressures on the supply of drivers, many of which are related to the pandemic,” said Vise, the FTL analyst. “One is the sharp reduction in new CDL drivers due to social distancing at schools, and especially on limits in issuing commercial learner’s permits, because the state agencies are stressed.”

Another contributor to the loss of drivers is an overall lower labor participation rate in the U.S. during the pandemic, Vise said. Of the entire population aged 16 or older, labor participation is down 2% compared with before the pandemic.

Furthermore, the trucking industry faces competition with construction, manufacturing and local delivery positions, Vise said.

“We are going to be challenged for months to come” due to all of these factors, Vise said, “and we don’t expect much change in the situation with capacity utilization.”

Moving into 2021, the FTR analysts forecast COVID-19 outbreaks at businesses will continue to disrupt the labor pool and may contribute to driver shortages, at least until vaccines are available to a wider swath of the population.

Additionally, legislation and regulation from the incoming administration of President-elect Joe Biden will likely play into the trucking market this year, particularly given the current political makeup of Congress.

Jonathan Starks, chief intelligence officer for FTR, noted that when there is a slim majority in the U.S. Senate, lawmakers often feel some urgency to act before the next round of elections comes up. That suggests there could be some significant legislative activity in the coming months, as Democrats control the U.S. House of Representatives and took narrow control of the Senate this month.

Regulatory changes can have a significant impact on the trucking market. For example, the electronic logging device (ELD) mandate that required compliance in 2017 created challenges in situations where there is a narrow window to pick up or drop off goods.

“We will probably know within the first half of 2021 what that regulatory agenda or legislative agenda really is going to look like and the pace that they’re looking to move,” Starks said.

A version of this story appeared in Resource Recycling on January 19.

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