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A Second Trucking Bloodbath?

A Second Trucking Bloodbath?

By Craig Fuller, CEO of FreightWaves

The freight market downturn is a year old. When will the market turn around?

It…

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A Second Trucking Bloodbath?

By Craig Fuller, CEO of FreightWaves

The freight market downturn is a year old. When will the market turn around?

It has been a year since I wrote “Why I believe a freight recession is imminent.” The article, published on March 31, 2022, stated my case for why I thought the U.S. trucking market was headed for a significant downturn. 

The information in the article was based on analysis from SONAR, FreightWaves’ high-frequency freight data and price reporting platform. SONAR is the market’s leading freight market analytics and price reporting system. 

At first, there was a great deal of vitriol aimed at the FreightWaves analysis and also disagreement about the health of the freight market. This was most pronounced coming from asset-based truckload carriers that predominantly operate in the contract market. The downturn, they believed, was a spot market phenomenon that wouldn’t impact them. 

Others contested the SONAR data and the FreightWaves staff analysis because they were using lagging indicators and government data. These tools have consistently proved to have little value and do not provide actionable insights that participants can use to manage their business — as SONAR does. Sure, they may provide some level of insight about what happened six months ago, but in the freight business, that might as well be a lifetime ago. 

The freight market is one of the most volatile markets on the planet. Hot markets can turn ice cold in a flash, particularly after the federal government and central bankers flooded our economy with so much liquidity and then proceeded to institute the fastest monetary tightening cycle in history. 

Hindsight is 20/20, and now the debate over the freight market downturn is a thing of the past. The freight recession has come, and carriers, regardless of whether they operate in the contract or spot markets, are having to contend with it. 

Executives of both carriers and brokers who we’ve spoken with have said the current freight market is among the most challenging of their careers and this is supported by the same SONAR data that was among the first to signal a sharp downturn. 

The last freight recession took place in 2019. It was called a “trucking bloodbath,” as excess capacity flooded into the market in the wake of the ELD mandate. Carriers operating on the edge couldn’t survive, particularly those operating strictly in the spot market. At one point, FreightWaves covered 10-plus bankruptcies per week. 

Freight market conditions are a function of the balance of supply and demand and the build-up of excess capacity is the most probable cause of the trucking boom-and-bust cycle. 

As we enter the second quarter of 2023, it appears that the freight market may be worse than the freight recession of 2019, as tender rejections are on the verge of dropping below 3% (now 3.05%). The low in 2019 was 3.86%.

A second trucking bloodbath? 

A second “trucking bloodbath” — something that we predicted in March 2022 — was slow to come. Truckload carriers had built strong balance sheets during the COVID super-cycle in freight; most were able to withstand 2022’s most challenging conditions. 

In March 2023, however, that changed. FreightWaves started to receive alerts from sources about a number of overnight shutdowns or carrier wind-downs that only happen when conditions are suddenly bleak. 

FreightWorks Transportation, a North Carolina truckload carrier with 200 trucks, announced it was shutting down on March 6. An executive from the carrier suggested that a large, long-term shipper suddenly pulled freight from the company and gave it to another carrier. This set off a series of cascading events that forced it to wind down its operations. 

On March 22, FreightWaves reported that Flagship Transport, a Miami-based carrier with 455 trucks under contract, suddenly stopped paying its bills, abruptly shuttered and stopped answering calls from drivers. This sudden shutdown is sadly all too common in the trucking industry. 

On March 24, FreightWaves reported that another Miami-based trucking company, Soler & Soler Hauling with 42 drivers, filed for bankruptcy. The company had a CDL training school but was also plagued with a number of safety violations. 

Often, carriers living on the edge are the most vulnerable in market climates like the one that our industry is facing. A sharp downturn does clean up some of the carriers with questionable operations, which are usually obvious when their safety records are reviewed. 

What about contract rates? 

With tender rejections so low, spot rates are unlikely to trend up. What does this mean for trucking contract rates? 

Because trucking capacity between contract and spot is fungible, the spread tells us what we need to know about the direction of contract rates. 

Contract rates and spot rates should trade within a tight range. Spot rates “pull on contract rates.” 

If spot rates are much higher than contract rates for a few months, they will “pull up” contract rates. If spot rates are much lower than contract rates for a period of time, they will pull down contract rates. 

Removing fuel surcharges entirely from both indices, the pre-COVID spread was in a range of -$0.33 to -$0.50/mile. In other words, before the pandemic, it was $0.33 to $0.50/mile cheaper to move a truckload of freight in the spot market rather than by contract. 

Today, that spread is -$0.86/mile. As long as this spread is so wide, shippers will continue to look to the spot market for capacity solutions and carriers will seek to replace any spot loads with contract rates, even if they have to bid contract rates at a cheaper rate than they have bid historically. 

Eventually, this gap between spot and contract rates should converge within a historical range. This is RFP award season and shippers are going to place contracted freight with carriers that bid closer to the spot rates they are currently paying. 

Truckload carriers should prepare for a brutal bid season. Shippers are going to claw back most of the contract rate gains they paid during the pandemic.

Truckload volumes match 2018 levels, a good year for trucking. But that isn’t a good thing. 

Trucking tender volumes are currently running at 2018 levels. Tender volumes track the number of truckloads electronically offered by shippers to carriers in the contract market. The white line in the chart below represents 2023, while the yellow line represents 2018. Orange represents 2019. 

2018 was a good year for trucking, but with so much capacity added over the past five years, a reset to those levels is not cause for celebration. 

According to the Federal Motor Carrier Safety Administration, the number of trucks in the for-hire market is up 29% since early 2018. It will take time to bleed off excess capacity. 

No one really knows what direction the U.S. economy will head during the next three quarters of 2023, but there is plenty of reason to expect that the “Great Purge” in trucking will continue for the foreseeable future.

Tyler Durden Wed, 04/05/2023 - 10:47

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The next pandemic? It’s already here for Earth’s wildlife

Bird flu is decimating species already threatened by climate change and habitat loss.

I am a conservation biologist who studies emerging infectious diseases. When people ask me what I think the next pandemic will be I often say that we are in the midst of one – it’s just afflicting a great many species more than ours.

I am referring to the highly pathogenic strain of avian influenza H5N1 (HPAI H5N1), otherwise known as bird flu, which has killed millions of birds and unknown numbers of mammals, particularly during the past three years.

This is the strain that emerged in domestic geese in China in 1997 and quickly jumped to humans in south-east Asia with a mortality rate of around 40-50%. My research group encountered the virus when it killed a mammal, an endangered Owston’s palm civet, in a captive breeding programme in Cuc Phuong National Park Vietnam in 2005.

How these animals caught bird flu was never confirmed. Their diet is mainly earthworms, so they had not been infected by eating diseased poultry like many captive tigers in the region.

This discovery prompted us to collate all confirmed reports of fatal infection with bird flu to assess just how broad a threat to wildlife this virus might pose.

This is how a newly discovered virus in Chinese poultry came to threaten so much of the world’s biodiversity.

H5N1 originated on a Chinese poultry farm in 1997. ChameleonsEye/Shutterstock

The first signs

Until December 2005, most confirmed infections had been found in a few zoos and rescue centres in Thailand and Cambodia. Our analysis in 2006 showed that nearly half (48%) of all the different groups of birds (known to taxonomists as “orders”) contained a species in which a fatal infection of bird flu had been reported. These 13 orders comprised 84% of all bird species.

We reasoned 20 years ago that the strains of H5N1 circulating were probably highly pathogenic to all bird orders. We also showed that the list of confirmed infected species included those that were globally threatened and that important habitats, such as Vietnam’s Mekong delta, lay close to reported poultry outbreaks.

Mammals known to be susceptible to bird flu during the early 2000s included primates, rodents, pigs and rabbits. Large carnivores such as Bengal tigers and clouded leopards were reported to have been killed, as well as domestic cats.

Our 2006 paper showed the ease with which this virus crossed species barriers and suggested it might one day produce a pandemic-scale threat to global biodiversity.

Unfortunately, our warnings were correct.

A roving sickness

Two decades on, bird flu is killing species from the high Arctic to mainland Antarctica.

In the past couple of years, bird flu has spread rapidly across Europe and infiltrated North and South America, killing millions of poultry and a variety of bird and mammal species. A recent paper found that 26 countries have reported at least 48 mammal species that have died from the virus since 2020, when the latest increase in reported infections started.

Not even the ocean is safe. Since 2020, 13 species of aquatic mammal have succumbed, including American sea lions, porpoises and dolphins, often dying in their thousands in South America. A wide range of scavenging and predatory mammals that live on land are now also confirmed to be susceptible, including mountain lions, lynx, brown, black and polar bears.

The UK alone has lost over 75% of its great skuas and seen a 25% decline in northern gannets. Recent declines in sandwich terns (35%) and common terns (42%) were also largely driven by the virus.

Scientists haven’t managed to completely sequence the virus in all affected species. Research and continuous surveillance could tell us how adaptable it ultimately becomes, and whether it can jump to even more species. We know it can already infect humans – one or more genetic mutations may make it more infectious.

At the crossroads

Between January 1 2003 and December 21 2023, 882 cases of human infection with the H5N1 virus were reported from 23 countries, of which 461 (52%) were fatal.

Of these fatal cases, more than half were in Vietnam, China, Cambodia and Laos. Poultry-to-human infections were first recorded in Cambodia in December 2003. Intermittent cases were reported until 2014, followed by a gap until 2023, yielding 41 deaths from 64 cases. The subtype of H5N1 virus responsible has been detected in poultry in Cambodia since 2014. In the early 2000s, the H5N1 virus circulating had a high human mortality rate, so it is worrying that we are now starting to see people dying after contact with poultry again.

It’s not just H5 subtypes of bird flu that concern humans. The H10N1 virus was originally isolated from wild birds in South Korea, but has also been reported in samples from China and Mongolia.

Recent research found that these particular virus subtypes may be able to jump to humans after they were found to be pathogenic in laboratory mice and ferrets. The first person who was confirmed to be infected with H10N5 died in China on January 27 2024, but this patient was also suffering from seasonal flu (H3N2). They had been exposed to live poultry which also tested positive for H10N5.

Species already threatened with extinction are among those which have died due to bird flu in the past three years. The first deaths from the virus in mainland Antarctica have just been confirmed in skuas, highlighting a looming threat to penguin colonies whose eggs and chicks skuas prey on. Humboldt penguins have already been killed by the virus in Chile.

A colony of king penguins.
Remote penguin colonies are already threatened by climate change. AndreAnita/Shutterstock

How can we stem this tsunami of H5N1 and other avian influenzas? Completely overhaul poultry production on a global scale. Make farms self-sufficient in rearing eggs and chicks instead of exporting them internationally. The trend towards megafarms containing over a million birds must be stopped in its tracks.

To prevent the worst outcomes for this virus, we must revisit its primary source: the incubator of intensive poultry farms.

Diana Bell does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Spread & Containment

A major cruise line is testing a monthly subscription service

The Cruise Scarlet Summer Season Pass was designed with remote workers in mind.

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While going on a cruise once meant disconnecting from the world when between ports because any WiFi available aboard was glitchy and expensive, advances in technology over the last decade have enabled millions to not only stay in touch with home but even work remotely.

With such remote workers and digital nomads in mind, Virgin Voyages has designed a monthly pass that gives those who want to work from the seas a WFH setup on its Scarlet Lady ship — while the latter acronym usually means "work from home," the cruise line is advertising as "work from the helm.”

Related: Royal Caribbean shares a warning with passengers

"Inspired by Richard Branson's belief and track record that brilliant work is best paired with a hearty dose of fun, we're welcoming Sailors on board Scarlet Lady for a full month to help them achieve that perfect work-life balance," Virgin Voyages said in announcing its new promotion. "Take a vacation away from your monotonous work-from-home set up (sorry, but…not sorry) and start taking calls from your private balcony overlooking the Mediterranean sea."

A man looks through his phone while sitting in a hot tub on a cruise ship.

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This is how much it'll cost you to work from a cruise ship for a month

While the single most important feature for successful work at sea — WiFi — is already available for free on Virgin cruises, the new Scarlet Summer Season Pass includes a faster connection, a $10 daily coffee credit, access to a private rooftop, and other member-only areas as well as wash and fold laundry service that Virgin advertises as a perk that will allow one to concentrate on work

More Travel:

The pass starts at $9,990 for a two-guest cabin and is available for four monthlong cruises departing in June, July, August, and September — each departs from ports such as Barcelona, Marseille, and Palma de Mallorca and spends four weeks touring around the Mediterranean.

Longer cruises are becoming more common, here's why

The new pass is essentially a version of an upgraded cruise package with additional perks but is specifically tailored to those who plan on working from the ship as an opportunity to market to them.

"Stay connected to your work with the fastest at-sea internet in the biz when you want and log-off to let the exquisite landscape of the Mediterranean inspire you when you need," reads the promotional material for the pass.

Amid the rise of remote work post-pandemic, cruise lines have been seeing growing interest in longer journeys in which many of the passengers not just vacation in the traditional sense but work from a mobile office.

In 2023, Turkish cruise line operator Miray even started selling cabins on a three-year tour around the world but the endeavor hit the rocks after one of the engineers declared the MV Gemini ship the company planned to use for the journey "unseaworthy" and the cruise ship line dealt with a PR scandal that ultimately sank the project before it could take off.

While three years at sea would have set a record as the longest cruise journey on the market, companies such as Royal Caribbean  (RCL) (both with its namesake brand and its Celebrity Cruises line) have been offering increasingly long cruises that serve as many people’s temporary homes and cross through multiple continents.

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As the pandemic turns four, here’s what we need to do for a healthier future

On the fourth anniversary of the pandemic, a public health researcher offers four principles for a healthier future.

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John Gomez/Shutterstock

Anniversaries are usually festive occasions, marked by celebration and joy. But there’ll be no popping of corks for this one.

March 11 2024 marks four years since the World Health Organization (WHO) declared COVID-19 a pandemic.

Although no longer officially a public health emergency of international concern, the pandemic is still with us, and the virus is still causing serious harm.

Here are three priorities – three Cs – for a healthier future.

Clear guidance

Over the past four years, one of the biggest challenges people faced when trying to follow COVID rules was understanding them.

From a behavioural science perspective, one of the major themes of the last four years has been whether guidance was clear enough or whether people were receiving too many different and confusing messages – something colleagues and I called “alert fatigue”.

With colleagues, I conducted an evidence review of communication during COVID and found that the lack of clarity, as well as a lack of trust in those setting rules, were key barriers to adherence to measures like social distancing.

In future, whether it’s another COVID wave, or another virus or public health emergency, clear communication by trustworthy messengers is going to be key.

Combat complacency

As Maria van Kerkove, COVID technical lead for WHO, puts it there is no acceptable level of death from COVID. COVID complacency is setting in as we have moved out of the emergency phase of the pandemic. But is still much work to be done.

First, we still need to understand this virus better. Four years is not a long time to understand the longer-term effects of COVID. For example, evidence on how the virus affects the brain and cognitive functioning is in its infancy.

The extent, severity and possible treatment of long COVID is another priority that must not be forgotten – not least because it is still causing a lot of long-term sickness and absence.

Culture change

During the pandemic’s first few years, there was a question over how many of our new habits, from elbow bumping (remember that?) to remote working, were here to stay.

Turns out old habits die hard – and in most cases that’s not a bad thing – after all handshaking and hugging can be good for our health.

But there is some pandemic behaviour we could have kept, under certain conditions. I’m pretty sure most people don’t wear masks when they have respiratory symptoms, even though some health authorities, such as the NHS, recommend it.

Masks could still be thought of like umbrellas: we keep one handy for when we need it, for example, when visiting vulnerable people, especially during times when there’s a spike in COVID.

If masks hadn’t been so politicised as a symbol of conformity and oppression so early in the pandemic, then we might arguably have seen people in more countries adopting the behaviour in parts of east Asia, where people continue to wear masks or face coverings when they are sick to avoid spreading it to others.

Although the pandemic led to the growth of remote or hybrid working, presenteeism – going to work when sick – is still a major issue.

Encouraging parents to send children to school when they are unwell is unlikely to help public health, or attendance for that matter. For instance, although one child might recover quickly from a given virus, other children who might catch it from them might be ill for days.

Similarly, a culture of presenteeism that pressures workers to come in when ill is likely to backfire later on, helping infectious disease spread in workplaces.

At the most fundamental level, we need to do more to create a culture of equality. Some groups, especially the most economically deprived, fared much worse than others during the pandemic. Health inequalities have widened as a result. With ongoing pandemic impacts, for example, long COVID rates, also disproportionately affecting those from disadvantaged groups, health inequalities are likely to persist without significant action to address them.

Vaccine inequity is still a problem globally. At a national level, in some wealthier countries like the UK, those from more deprived backgrounds are going to be less able to afford private vaccines.

We may be out of the emergency phase of COVID, but the pandemic is not yet over. As we reflect on the past four years, working to provide clearer public health communication, avoiding COVID complacency and reducing health inequalities are all things that can help prepare for any future waves or, indeed, pandemics.

Simon Nicholas Williams has received funding from Senedd Cymru, Public Health Wales and the Wales Covid Evidence Centre for research on COVID-19, and has consulted for the World Health Organization. However, this article reflects the views of the author only, in his academic capacity at Swansea University, and no funding or organizational bodies were involved in the writing or content of this article.

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