Truckers hit by pandemic face rocky road to recovery

Cash-strapped truckers say that low freight rates and industry regulation are forcing thousands into bankruptcy as coronavirus lockdowns hit demand. (Reuters)
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Updated 15 May 2020

Truckers hit by pandemic face rocky road to recovery

  • Lockdowns and supply chain disruption turn freight industry on its head

CHICAGO: Bryan Hutchens in Oklahoma estimates he has only used his two flat-bed trucks to shift oilfield equipment for a week out of the past month as the coronavirus crisis shutters businesses.

In New York, trucking firm ERL Intermodal said that its cargo volumes have halved as lockdowns sideline its business of moving everything from olive oil to garden hoses to truck parts.

At the world’s busiest border, trucks hauling food and consumer products north to the US are returning empty to Mexico, where mass job losses have hit demand, leaving cash-strapped truckers to log hundreds of costly, empty miles.

The pandemic has turned the global trucking industry on its head. As swathes of the world economy shut down, and curbs on movement and gatherings disrupt supply chains, freight companies are hemorrhaging cash and sidelining thousands of truckers.

“Once the economy gets going again, my fear is that there will be so many truckers out of the business by then,” said Steve Sperbeck, general manager for ERL, which has a fleet of 52 trucks based in Utica, New York.

According to the International Road Transport Union (IRU) in Geneva, which represents operators in 80 countries, new freight contracts have declined by 60 percent to 90 percent since COVID-19 struck while empty runs have climbed by up to 40 percent.

For truckers shipping products such as carparts, clothes, flowers and construction materials, operations have ground to an almost complete halt, the IRU said.

Lockdown restrictions in India, the world’s second most populous country, have sidelined 80 percent of the 10 million trucks behind a $130 billion industry that hauls 60 percent of the country’s freight.

In Brazil, which relies on trucks to shift key exports such as soybeans, coffee and sugar to ports, shipments have also slumped. Carlos Litti, director for road transportation at the National Confederation of Transport Workers, said firms were now delaying critical maintenance work such as tire retreading, as government support for the sector had been insufficient.

“At the moment, there is no way to pressure the government,” Litti said. “The economy just has to turn around.”

In March, US freight rates surged on fears the virus and the closure of highway truck stops would discourage drivers from making long trips. But with many factories shut and port traffic down, rates have plummeted as truckers battle over jobs to try to stay afloat through the crisis.

If the pain is prolonged, smaller US carriers which cannot spread their costs across a large fleet could shut their doors, pushing skilled drivers out of the business and accelerating a longer-term shortage of truckers, industry groups say.

About 97 percent of trucking companies in the US operate fewer than 20 trucks, and 91 percent have six or fewer, according to the American Trucking Associations. Those workers rely more often on one-off jobs than long-term contracts.

Some routes are paying just 75 cents to 80 cents a mile, less than half of what’s needed to pay for fuel, insurance and other operating costs, according to five truckers. Pay is mostly determined by distances driven and they have also dropped.

When energy firms hit by the slump in oil prices stopped giving work to Hutchens in Oklahoma, he parked his rigs instead of rushing, like many other truckers, to haul essential goods such as food and medical equipment at loss-making rates.

Bids in the spot market have crashed to the lowest in years as shuttered factories, schools and malls have left scores of truckers that usually have longer-term contracts searching for new cargo to haul.

“In some lanes, rates are lower now than they were 15 years ago, but all of our costs, from fuel to insurance, have gone up,” Hutchens said.

He has laid off one employee and may have to begin selling his equipment if business does not return to more normal levels in the next two to three months.

Relaxed restrictions on driver hours and more transparency on shippers’ margins could help smaller operators compete, Hutchens said.

“We’re a small company. There’s not a whole lot we can cut,” he said. “When we do come back online, we don’t know what the volume is going to be, so we don’t know how quickly things are going to return to normal.” ERL Intermodal said that it earns more from pre-contracted shipments than spot market loads but revenues for the central New York trucker have also dropped. Six ERL drivers have been furloughed and paychecks for those left have dropped 30 percent as their hours behind the wheel decline.

To make ends meet, ERL leased nine of its refrigerated trailers to the Department of Homeland Security for use as makeshift morgues for COVID-19 victims. The company also tapped an emergency government loan program to help to pay salaries.

“Financially, it probably wasn’t the best decision, but good drivers are hard to come by,” said ERL’s Sperbeck.

At the Mexico-US border, some truckers are carrying just one full load south for every seven full northbound trips, well below the usual three-to-one ratio, according to data from freight forwarder Nuvocargo.

“We are very concerned that if business does not come back to usual, it’s going to result in things like bankruptcies and losing jobs,” Nuvocargo CEO Deepak Chhugani said.

Dozens of US truckers parked near the White House in Washington for over a week this month to protest over the low freight rates and industry regulations they say are disproportionately hurting small, independent truckers.

Standing by make-shift shelters, truck driver Mike Landis from Pennsylvania said his workload had dropped by up to 50 percent since the pandemic struck, and most of the jobs available were being offered at rates below operating costs.

“After being told we’re essential and told by the government to stay out here and basically risk our health to continue moving the things that the country needs, we’re being gouged,” Landis said.

“We’re here as middle-class people, the people that put the president in office, and we’re here asking him for help.”


European bank ramps up stimulus package

Updated 05 June 2020

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.