Trucking’s Feeling the Pain of New Regulations

Written by Tim Triplett

New rules requiring electronic logging devices (ELDs) to monitor drivers’ hours behind the wheel are having the predicted effect on the market, disrupting trucking operations, igniting fierce competition for trucking capacity and sharply raising freight rates.

Under the complicated hours of service regulations that took effect Dec. 18, drivers can work no more than a 14-hour day and can only be behind the wheel 11 of those 14. Then they must take at least a 10-hour break. Any delays at ports, docks or loading stations count against their 14-hour time limit. No longer can drivers fudge hand-written logs to game the system and add to their time on the road.

While meant to reduce fatigue-related traffic accidents, the new rule also exacerbates the tight supply of trucking capacity and worsens the shortage of truck drivers. Sympathetic regulators have promised soft enforcement until around April to give the market time to adjust, but the issues appear unlikely to shake out in just a few months.

With demand for trucks outpacing supply, freight rates are on the increase. Spot truckload rates set new records in January as capacity remained tight due to shipper demand and fallout from the ELD mandate, reported freight marketplace DAT Solutions. The national average flatbed spot rate was $2.39 per mile, 7 cents higher compared to December and 47 cents higher year over year. The spot rate topped the average contract rate by 7 cents.

Economic growth contributed to the surge in rates, as did capacity constraints related to ELDs. Demand for spot truckload freight services (for all products, not just steel) increased 28 percent over December and 65 percent compared to January 2017, according to DAT’s North American Freight Index.

Steel mills and service centers are scrambling to secure enough trucking capacity to meet customers’ needs. They are also puzzling over how to adapt operations to the new regulatory reality.

What’s proving particularly troublesome are the short hauls, noted one Midwestern service center executive. “Lanes of around 300 miles that are usually done in a day are really going through an enormous flux right now. There has not been a lot of focus yet on what is really happening on the ground,” he said.

If traffic or weather cause unexpected delays, and the clock runs out for the driver, his load can’t be delivered until the next day. Also troublesome are lanes of 150-200 miles where the driver expects to complete the round trip and get back home every night. “My guys sometimes have to get off at the next exit and find a motel. We also lose a big part of their next day’s potential,” he said.

Available trucking capacity varies widely by region. Pending trade action under Section 232 could further restrict steel imports and shift trucking demand, noted a distributor in the Southeast. “In a post-232 world where less steel is coming into the ports, that material will be replaced by steel coming out of domestic mills, which will put even more of a strain on the trucking networks,” he predicted.

Steel shippers are searching for solutions, but there are no clear answers. Put two drivers in each truck? Too costly and there aren’t enough drivers for even one per truck. Reconfigure routes for shorter runs? Shorter runs mean more runs—and more drivers. Switch more loads to rail? It’s less efficient and more complicated logistically.

“Everyone is looking to put more lanes on rail, but nobody wants to wait two weeks for material to arrive, and it costs more than truck. And the railroads are already bursting with volume,” said one service center source. The number of truck trailers moved by rail in January rose 10 percent from the year before, according to the Association of American Railroads.

Service centers that try to increase the volume they ship by rail must make sure they have the capacity and railcars are not left stranded. “Railroads are aggressively enforcing their demurrage rules,” one source noted. Demurrage is the penalty railroads charge when privately owned railcars sit on railroad property too long or railroad-owned railcars are used too long during loading and unloading.

The ultimate solution to the shortage of trucking capacity is to recruit more drivers. Not an easy task as the industry struggles just to replace the thousands who are retiring or resigning to take less demanding jobs. “Demographically, a lot of my veterans are aging. We try to make their lives easier. Give them newer trucks with automatic transmissions. Try to make it a more attractive job. But it’s difficult,” said the Midwestern exec.

Because of the urgent need, drivers are finally starting to command better wages and working conditions. One large service center told SMU it is planning for at least a 10-15 percent increase in its transportation costs in 2018, including higher freight rates and the cost to hire and train new drivers.

The American Trucking Association estimates the shortage of drivers for all types of loads is currently about 50,000, and it could grow to more than 174,000 by 2026, factoring in the demographics of the aging driver population, lifestyle issues and the difficulty in attracting young people to a career in trucking. “Unless steps are taken to make it easier for individuals to pursue careers in trucking, demand for drivers will continue to outstrip supply—eventually even leading to supply chain disruptions,” said ATA Chief Economist Bob Costello.

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