It is no secret that the economy of the United States has taken a huge hit. There were 3.3 million people signed up for unemployment by March 21, 2020. However, these high numbers are expected to continue to rise and when it comes to reefer shipping and the entire trucking industry, it is felt that the worst is still to come.
No one could have really predicted the effects the stay at home orders would have on the economy. The spread of COVID-19 has impacted the marketplace and as part of that, the transportation system. It is currently being predicted that reefer shipping, specifically in the GDP sector, could drop as much as 24 percent in the second quarter.
COVID-19 & Reefer Shipping
This is huge and there is no way to get around it. There are going to be many impacts seen in the system moving into the second quarter. Industrial output will also take a hit, with an expectation of at least a 15 percent drop in production. This is due to factories being locked up temporarily as a way to deal with the spread of the virus.
A turnaround is not expected until at least the fourth quarter. Freight is not expected to return to peak levels that were seen in 2019, until at least the middle of 2021. A year to a year and a half recovery is expected just to get back to the levels that the shipping industry was seeing in the first part of 2019.
What Can Trucking Providers Expect?
Currently, the reefer shipping industry is going through something that they have never gone through before. This is similar to a catastrophic hurricane, but instead of only being in one single area, it is all over the country and there is no end to this insight.
There have been a few benefits seen by the trucking industry. Spot market rates for reefer loads and dry van loads were higher over the past few weeks. The load availability for refrigerated loads has spiked as well. However, non-essential freight has been impacted, and specialized and flatbed loads are declining. Retail restocking efforts that are driving the spikes in reefer freight and dry van loads, could go away quite quickly.
It is likely that the spot market might stay elevated for a bit, but overall freight volumes are going to start to fade. To compare, the prediction for the freight industry before the crisis was a modest gain of 1.3 percent. Now, it is expected that truck loadings will decrease by as much as four percent, if not more.
Bulk, flatbed, and dump segments will be the areas that are hit the hardest. The loadings are expected to decrease from six to nine percent. The only thing that might help this is a bill for infrastructure that would jumpstart the construction industry. Reefer loads should finish the year close to where they were in 2019 if things remain the same.
Other Factors COVID-19 & Reefer Shipping
Another factor that must be considered when it comes to reefer shipping is that many drivers are currently exiting the industry for several other reasons. First, available mileage is dwindling and the government is supporting workers with substantial payments. Drivers might choose to simply stay home as they will be making more money drawing unemployment than what they can make while on the road.
Additionally, carrier bankruptcies will likely continue. Some of the underlying issues that were happening before the crisis that increased bankruptcies in the industry include the rising cost of insurance. These costs will not likely abate, which will put more pressure on the weaker performers.
Reefer shipping is not going away entirely as there is a definite demand for shipping. However, the way that items are being shipped and the types of items that are currently in demand has shifted. This means that the industry will need to change along with the changes in demands. There is no definitive end in sight as most states have extended stay at home orders through at least May and experts are stating that there could be another uprising in the spread of the virus as late as this fall, which could exacerbate the pinch that reefer shipping is already feeling.
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