HOBI Weekly Blog Recap (4/24-28/23)
For some time, electronic processors have seen higher freight rates as a result of a tight trucking market. Resource Recycling explains that a shortage of drivers, new regulations and rising fuel costs are contributing have created the ‘perfect storm’ in the freight industry, which has rippled across the wider recycling industry.
“We have been noticing fewer available lanes and rising costs,” said Jeff Gloyd, vice president of sales and marketing for URT Solutions. “URT has been actively seeking additional haulers and brokers in order to meet our customer’s needs… Unfortunately, like the falling commodity pricing, we have been forced to pass the increased freight costs on to our customers.”
George Hinkle, president of ITAD company Aroca Group and head of the e-scrap division of the Institute of Scrap Recycling Industries (ISRI), said the market pressure is not only impacting the ability to hire drivers, but it’s actually impacting processing.
“Reuse equipment offers a much larger margin than scrap, which makes it easier to absord increases in freight, whereas scrap or end-of-life materials have a much lower value and with the recent drop in commodity prices the increased freight can be a killer,” Hinkle said. “If a recycler does not have a downstream within a reasonable distance of their facility, it becomes difficult.”
ISRI, which represents recycling companies handling a variety of different materials, said it’s been “a real challenge” to secure transportation amid a shortage in trucking supply. The factors that create the ‘perfect store’ are:
- Logistics costs – Currently, logistics costs are more expensive than they were a year ago and based on market trends, they’ll only go up from here on out. Fuel prices are continuing to rise, up 20 cents per gallon year over year, with fuel surcharges (which are charged by trucking companies to ensure fuel costs are covered) rising as well.
- Driver shortage – Last fall, the American Trucking Association predicted there would be a shortage of 50,000 drivers by the end of 2017. But by June 2018, the Washing Post reported that there were 63,000 open trucking positions.
- ELD – The Electronic Logging Device has been a set back in the logistics industry since its introduction in December 2017. The mandate requires commercial truck drivers to use ELDs, which record drivers’ hours, a change from the previous standard of logging hours by hand on paper.
The combination of these factors have created an undesirable logistics atmosphere. And unfortunately, there isn’t a simple solution in sight. The shortage of drivers is by far the biggest factor to why the reverse logistics industry will see freight rates shoot up. For the past few years, there has been a massive decline in the amount of new drivers, which the trucking market heavily relies on. This is attributed to the negative stigma that comes along with the title of a truck driver. Forty years ago this stigma would not have existed however, with the push for younger generations to focus on education and obtain higher education, there is a lack of interest in an industry deemed “less than desirable” by the younger generations.
With 55 years being the average age of truck drivers, the supply chain industry simply does not have enough drivers to take over once the older truck driver generations retire. In fact, according to an industry analysis at the start of 2018, only one truck was available for every 12 loads needing to be shipped, which is the lowest the ratio has been since 2005. And with 70 percent of goods requiring trucks to be distributed, the industry will have a tough time filling the nearly 900,000 open positions to meet demand.
Experts say the availability of drivers will be a slow improvement and until the rate of drivers increases, the reverse logistics, including the recycling industry, can expect to see rising freight charges for at least the next two years.
Related posts
