The Trucking Economy (Contrasting USA and Australia)
We met with Aussie trucking veteran Dean Croke (FreightWaves - Chief Insight Analyst), who took some time to share with us contrasting the trucking economies of the USA and Australia and project what 2020 could look like.
Dean shared with us that there has been a huge shift in the USA. Changes in the tax code in 2018 resulted in a stimulus of the industrial sector. This was seen in the increase of trucking activity resulting in stronger prices and a record number of trucks entering the market (in September).
"Everyone thought it would stay around forever." Says Dean.
Then a Freight Recession occurred. Excess trucking capacity combined with only having standard freight volumes resulted in rates plummeting.
He explains there's a few reasons for the recession, the first being of geopolitical nature, namely the trade war between the USA and China. China has been the world's factory for over 20 years, but the war has created a shift in the supply chain.
USA companies moved their manufacturing out of China into Southeast Asian countries. This meant that instead of shipping out of China to the West Coast of the USA and then distributing goods by truck across the country, shipments came out of South East Asia and headed to the East Coast via the Suez Canal. This resulted in a big shift in the destination of container volumes and more freight in Eastern USA with shorter hauls.
Consumer confidence is, however still high, and people are still buying. Truckers that have exposure to the retail world are doing pretty well.
Heading Into 2020
Dean expressed that he sees a global slow down in trade heading into next year. Truckers with exposure to debt should revise their position and review operating costs. Rates will stay flat through the first half of next year.
Dean agrees that the Australian trucking economy is mirroring what is happening in the States, but as a 1/10th scale model of the USA.
Read Business Insiders' analysis of Australia's currently trucking economy HERE.
Sources: FreightWaves.com, Loadshift