Supply-side issues

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Supply-side issues have led to escalating costs and reduced availability of trucks for transporting recyclables.

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December 1, 2020


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Speakers during a webinar on trucking challenges affecting the recycling sector detailed the reasons for these issues and offered advice for coping with them. The Nov. 6 webinar, titled Today’s Trucking Challenges: Market Insights and Trends Moving Forward, was hosted by the Washington-based Institute of Scrap Recycling Industries (ISRI).

“I’m not surprised many of you are having issues in the trucking space,” Bob Costello, chief economist of the American Trucking Associations (ATA), Arlington, Virginia, said. “The industry has changed dramatically since May.”

Costello said many of the issues recyclers are experiencing, from increasing costs to reduced availability, stem primarily from a driver shortage, despite record-high unemployment in the U.S. related to the COVID-19 pandemic.

Demand for trucking, particularly in the spot market, has improved since the lockdowns that occurred early in the pandemic, he said. While spot market demand decreased a bit in October, Costello said the situation reflects supply-side issues, including contract carriers’ lack of capacity to respond to their customers’ needs. Retail inventory is at an all-time low, he said, and truckers are more focused on transporting retail or e-commerce freight, which often is easier and more profitable than transporting recyclables.

Costello said historically 80 percent to 85 percent of freight is contracted rather than sold on the spot market. However, during the pandemic, spot market trucking transactions have surged to as high as 80 to 90 percent and stood at 50 percent year over year as of early November.

Dan Titus, president of Weedsport, New York-based Page Trucking, said that as the trucking market began to turn around after pandemic-related lockdowns lifted, fleets’ loyalties to their customers became relative to the loyalty they felt from shippers during the lockdown. “Fleets were less willing to show the shippers the loyalty because they didn’t show us the loyalty.”

A foremost factor affecting truck availability is the shortage of drivers.

Fewer drivers

Costello said the commercial driver population is significantly older than the overall working population.

The average age of for-hire over-the-road truck drivers is 46, the ATA says in its “Truck Driver Shortage Analysis 2019.” That report notes that drivers in other trucking sectors, such as less-than-truckload and private carriers, are older on average. “While the driver shortage is not as acute in these sectors as it is in the over-the-road truckload sector, the high average age still affects the overall shortage,” the report notes. “As these two groups see drivers retire, they often go into the for-hire truckload labor pool to recruit drivers.”

Given the older average age of truck drivers and that COVID-19 has proven more harmful to older adults and those with preexisting conditions, many owner-operators have decided to retire rather than risk driving during the pandemic, Costello said.

”This was the story in the industry before the pandemic. For-hire fleets are operating fewer trucks than they were a year ago.” – Bob Costello of the American Trucking Associations on rising insurance costs

Titus echoed his comments. “This is very much a supply-side issue,” he said, adding that the rate of retirement for drivers ages 62 to 67 has increased 300 percent during the pandemic.

Additionally, commercial driving facilities have been closed during the pandemic, while state motor vehicle departments were closed for a time early on or operating at a limited basis, meaning would-be drivers have been unable to obtain commercial learner’s permits and commercial driver’s licenses (CDLs).

Costello said training of new drivers has declined 30 percent to 40 percent so far this year. “It will take a year or more before we dig out of this hole, even if the pandemic were to end today,” he added. “But we are probably not going to be out of the pandemic for another year.”

Titus said electronic logging mandates that were introduced in 2018 to enforce the hours of service law reduced the capacity of drivers by reducing their productivity or taking drivers out of the market, as well.

The driver shortage has been exacerbated by the CDL Drug and Alcohol Clearinghouse, https://clearinghouse.fmcsa.dot.gov, which the Federal Motor Carrier Safety Administration (FMCSA) introduced earlier this year. This database contains information pertaining to violations of the U.S. Department of Transportation drug and alcohol testing program for holders of CDLs.

The clearinghouse rule requires FMCSA-regulated employers, medical review officers, substance abuse professionals, third-party administrators and other service agents to report information related to violations of the drug and alcohol regulations in 49 Code of Federal Regulations, Parts 40 and 382, by current and prospective employees.

According to the clearinghouse rule:

  • Employers must query the database for current and prospective employees’ drug and alcohol violations before permitting those employees to operate a commercial motor vehicle on public roads.
  • Employers must query the clearinghouse database annually for each driver currently employed.

“Specifically, information maintained in the clearinghouse enables employers to identify drivers who commit a drug or alcohol program violation while working for one employer, but who fail to subsequently inform another employer (as required by current regulations),” according to FMCSA. “Records of drug and alcohol program violations will remain in the clearinghouse for five years, or until the driver has completed the return-to-duty process, whichever is later.”

Costello said more than 34,000 drivers are listed in prohibited status in the clearinghouse database, with 26,590 yet to start the return-to-duty process. Of these violations, roughly 51 percent were for marijuana and 15 percent were for cocaine, he explained, adding that a roadside test for pot similar to the one for alcohol could help to ease this issue; however, no such test is available.

Titus added that he does not think the federal government should loosen the standards for the clearinghouse.

Costello agreed, saying, “We don’t want these people on the road.”

Because of all these factors, a 105,000-driver shortage is predicted by 2023, he added.

Vice President of North American Metals Steve Shinn, who works out of California for Sims Metal Management, headquartered in Rye, New York, said that company uses a combination of in-house trucking and third-party drivers. He said having an in-house fleet provides some advantage in that it lessens the struggle to hire third-party trucking.

However, he said third-party support was “critical” for keeping loads moving, explaining that he finds balancing in-house transportation with third-party services an “optimization exercise.”

Shinn acknowledged that recyclers “generally are looking for the lowest cost option in the industry” when it comes to trucking, so it’s sometimes inaccurate when they say they can’t get trucking. What they actually mean, he said, is that they can’t get it at the right price.

Shinn predicted the tightness in the market would extend into the first quarter of 2021 or longer.

Insurance difficulties

The rising cost of liability insurance also likely has reduced trucking capacity, Costello said. “This was the story in the industry before the pandemic. For-hire fleets are operating fewer trucks than they were a year ago.”

Titus said Page Trucking has seen its insurance rates “grow virtually exponentially.” He added that the company’s rate increased 35 percent recently, despite receiving ISRI’s 2020 Transportation Safety Award in the Best Fleet Large Class and Pacesetter Large Class categories for having the lowest vehicle crash rate and the lowest Department of Transportation (DOT) Crash Recordable rate in the past year and over a three-year period from Jan. 1, 2017, to Dec. 31, 2019, respectively.

Titus predicted “challenging circumstances” related to increasing insurance rates and the labor shortage will continue. However, he expressed some hope that the CDL Drug and Alcohol Clearinghouse could lead to reductions in insurance costs in the future.

The give and take of partnership

Titus added that Page Trucking will continue to take a partnership approach with its shippers to reduce time spent on-site and to optimize labor and time at home for its drivers. He recommended that recyclers take a similar partnership approach with carriers.

“Don’t chase the bid market,” Titus advised recyclers when it comes to securing trucking. “We try to develop a relationship with our shippers so when things are lean, we can lean on them. We don’t abandon them when the market is hot. Relationships can even out the ebb and flow. But it comes at a cost in that you have to show loyalty when you don’t have to.”

Costello predicted that trucking would remain difficult to obtain and more expensive through the end of 2020, with a leveling off in pricing—though at a higher level—at the end of the first quarter of 2021.

The author is editor of Recycling Today and can be contacted at dtoto@gie.net.