Dive Brief:

• A booming freight market and cost controls led Knight-Swift, the nation's largest truckload carrier, to post Q3 revenues and net income that exceeded the numbers from Q3 2019, a sign that the TL sector has turned the corner and put the pandemic shutdown woes behind it. Net income was up 63.6% from a year earlier, according to Knight-Swift's Q3 earnings release.
• But it wasn't just shippers' demands that lifted the market. The TL market had "constrained capacity ... which we expect will continue into the fourth quarter," Knight-Swift officials reported. The carrier also saw an increase in intermodal business compared to Q2, although load volumes were down 5.7% YoY.
• "Inventory restocking and strong demand will support a favorable environment into 2021,"Knight-Swift officials said. Demand will lead to low double-digit contract rate increases in 2021, and the driver shortage under tight market conditions will lead to higher wages for drivers, the company reported.

Dive Insight:

One of the big trucking stories of late summer and early autumn is how much low inventories led to a need to restock well before the holiday season, yielding a quick recovery from the market lows caused by the initial onset of the pandemic in the spring. Capacity is so tight, and inventories so low, that shippers are coming to Knight-Swift to start talks about higher contract rates for service in 2021, said Brad Stewart, executive vice president of finance for Knight-Swift.

"[Shippers] are in need of help," said Stewart.

Armstrong & Associates predicted such a trend in August, noting the uncertain market will play into the hands of dedicated carriers.

"We anticipate the COVID-19 economic volatility in domestic transportation and increases in domestic transportation demand to [positively] impact [dedicated contract carriage] growth for the remainder of the year as shippers look for a safe haven for capacity and as DCC providers continue to benefit from contracts negotiated prior to the pandemic," the report stated.

Knight-Swift CEO David Jackson also called it, when he told a UBS webinar in June that truck capacity had shrunk, as spot markets pushed some TL carriers out of the market. It would lead to a tighter market and higher rates, Jackson said. And as the year goes on, the trucking sector could see "acute tightness," as more businesses reopen and demand a higher volume of carrier services.

Stewart said the fact that shippers are seeking out Knight-Swift ahead of bid season — the heaviest part of that season usually runs from January to April, with early bidders asking in the autumn before the new year — makes it a very interesting quarter, one indicative of a hunger for TL capacity.

"It's been above seasonal activities," said Stewart. "It's been what you would expect in the fourth quarter."

And driving the demand and the shippers' concern are "historically low inventories," said Stewart.

The surge is spread among other carriers, too. On Friday, J.B. Hunt reported its revenue and operating income were both up 5% YoY in Q3. Intermodal income was up 22% from Q3 2019. Demand for new drivers, for replacement and growth needs, is "abnormally" high, said John Roberts, J.B. Hunt CEO and president.

It is not just carriers seeing the growth. OEMs are seeing carriers and fleets make orders, betting on future freight demand in 2021. Volvo Group reported Friday its order intake in Q3 was up 61%, compared to the same period last year. Class 8 truck sales came in above 19,000 in September, Wards Intelligence reported. The numbers are an improvement from April, when fleets made 4,275 orders, according to ACT Research data.

But the epicenter of the freight boom may be warehouses, where some of the numbers have never been better.

NFI recently said it would hire 5,000 people over the next few months in response to demands from e-commerce and a growing freight economy. Many of the new hires will be warehouse workers in such major consumer markets as Southern California, the Lehigh Valley in Pennsylvania, Dallas-Fort Worth, and the Chicago suburb of Minooka, Illinois, among others.