October 4, 2010

Easy days past for shippers, IP executive says

The era of abundant capacity and cheap rates in the domestic trucking market is coming to an end, warns International Paper exec.

By Mark B. Solomon

A top shipper executive said the days of abundant capacity and cheap rates in the domestic market were over, and that shippers need to prepare for a world where "we're not going to be able to move freight... the way we have in the past."

Tom Carpenter, director-logistics, North America for International Paper Co. (IP), said shippers for years have enjoyed easy access to large quantities of inexpensive space. That era is rapidly coming to an end, he said.

Carpenter said possible tightening of driver hours-of-service regulations together with the implementation of federal rules governing driver safety would have the combined effect of taking thousands of drivers and their rigs off the road. Another problem is the lack of infrastructure investment. "We are not as a country sufficiently reinvesting in our infrastructure to keep up with tonnage increases," said Carpenter, noting that truck traffic is growing at a rate 11 times faster than the growth of highway capacity.

When asked if shippers should take responsibility for leveraging the economic downturn to beat down carriers on pricing, Carpenter responded, "I think we have over-personalized this to some degree. But if the marketplace is giving us [excess capacity at low rates], we have a fiduciary responsibility to bring some of it back."

IP is one of 150 shippers and trade groups belonging to the Coalition for Transportation Productivity, a group dedicated to raising the gross vehicle weight limit to 97,000 pounds from 80,000 for single-trailer trucks operating on the nation's interstate highways, and adding a sixth axle to the trailer for better braking and balance. Carpenter said raising the gross vehicle weight limit would enable the same amount of freight to be hauled in fewer trucks.

John Smith, chairman of CRST International, one of the nation's largest truckload carriers, said that truckload demand and capacity are now "fairly balanced," as freight volumes begin to slow. Smith added that little, if any, new truck capacity is coming on line. "People are just now getting back to a replacement cycle. No one is adding capacity," he said.

Smith said he doesn't expect the peak holiday shipping season to be memorable, either. "We're not seeing the normal Christmas rush this year," he said.

A sub-theme of the CSCMP session was "The War on Trucking," a reference to concerns among trucking interests that the industry is being demonized as fuel-guzzling, road-choking killers who have little regard for the safety of the motorists they share the road with. Smith, for his part, acknowledged the frustration of dealing with those perceptions.

"I don't think there's an understanding of how important we are," he said.