Hurricane Sandy devastated the Northeast in October but it could have a noticeable impact on the U.S. trucking market come spring, according to two freight industry professionals.
As recovery and reconstruction efforts pick up pace with warmer weather, demand for building materials is expected to increase and with it the need for trucks to deliver lumber, shingles, siding, pre-fabricated concrete, pipes, insulation, bricks, blinds, furniture and other products. The influx of trucking assets to meet demand will exacerbate a tight market and lead to a national shortage of trucks, especially for flatbed, dry van and refuse haulers, Noël Perry, senior consultant for freight analyst FTR Associates and head of econometrics firm Transport Fundamentals, said in an interview.
Motor carriers pared their fleets during the recession and have been very disciplined about adding equipment until the economy makes a decisive upward turn. Meanwhile, companies are having difficulty finding qualified drivers in the face of competition from other blue-collar industries and stricter safety regulations.
The availability of truck capacity around the country will be 1 to 2 percent less in the spring, which in turn will cause truck rates to increase 5 percent from the fourth quarter of 2012, he said, elaborating on comments he made during a Nov. 8 conference call
about domestic transportation trends hosted by investment bank Stifel Nicolaus.
The supply of trucks could tighten noticeably in the March-April period, especially in the Northeast, because that is a peak shipping season as consumer shopping, home buying and construction typically ramps up from the winter doldrums, said Perry, an economist who has a good track record of accurately predicting economic trends.
Perry estimated the total rebuilding effort will cost about $100 billion, 10 percent of which will go for freight transportation. The resulting effect on prices will increase revenue for transportation providers, including railroads, an additional $4 billion, bringing the industry's total gain to $14 billion.
New York City, Long Island and the New Jersey coast are already heavy inbound markets because of the high population density and limited amount of manufacturing. The influx of one-way freight to the hurricane zone will compound a weak back-haul market, putting pressure on rates to cover the cost of repositioning empty trucks.
The Florida East Coast Railway (FEC) expects to benefit from the building of infrastructure, and commercial and residential properties, in the Northeast, Chief Executive Officer James Hertwig, told American Shipper
Truckers will turn down business in the Southeast and flock to the region because the urgent need for supplies will allow them to command higher pay, as happened following Hurricane Katrina, he said.
"We like it because once people begin using our services and find its really good they don't go back to truck," Hertwig said on the sidelines of an annual conference in Anaheim, Calif., held last month by the National Industrial Transportation League and the Intermodal Association of North America.
FEC runs trains every day between Miami and Jacksonville, where it interchanges with the Norfolk Southern and CSX railroads that have networks throughout the eastern United States.
Eighty percent of the railroad's revenue is generated by its intermodal business, which includes highway service that handles pickup and delivery at terminals and customer locations. It also provides carload service to move commodities such as crushed rock, automobiles, bulk liquids, building materials and orange juice. - Eric Kulisch