As 2022 comes to a close, now is a good time to reflect on how wrong our predictions were for how this year would shape out. After two years of consecutive growth, most believed the supply chain industry would continue upward. Let’s take a look at our 2022 year in review.
Fast forward to today, and you’ll notice that the once-optimistic industry is now picking up the pieces. Geopolitical turmoil, rising gas prices, shifting imports, and declining spot rates. Just a few of the obstacles that the industry had to overcome this year. After riding high for the last few years, 2022 was a significant wake-up call for the supply chain.
Article Overview
Russian Invasion of Ukraine
Many of the problems facing the transportation industry today stem from the Russian invasion of Ukraine in early 2022. Among the obvious tragedies of war and its impact on the people, the effect on the supply chain was disastrous for the global supply chain.
As the war continues to rage on and wreck national economies, a report from Safety4Sea highlights some of the key consequences.
- Increased Fuel Prices and Operating Costs
- Trade restrictions and logistical hurdles led to rising fuel prices around the globe.
- Shipping costs increased due to marine bunker prices increasing.
- The global price for very low sulfur fuel oil increased by a staggering 64% by the end of May 2022.
- Shift to Alternative Fuels
- As a result of rising fuel prices, many in the shipping industry have explored (or at least partially implemented) the use of alternative fuels.
- Ammonia
- Hydrogen
- Liquified Natural Gas
- As a result of rising fuel prices, many in the shipping industry have explored (or at least partially implemented) the use of alternative fuels.
- Global Trade Disruption
- Ukraine and Russia combined for nearly 12% of global exports.
- Following repeated attacks on merchant vessels traveling through the Black Sea, Ukraine has been forced to reroute over 90% of its agricultural exports.
- Sanctions and company suspensions prevented shipments to and from both Russia and Ukraine
As we approach year two of this devastating conflict, the impacts will likely continue to be felt throughout the industry.
Critical Issues that Faced the Trucking Industry in 2022
The Russia-Ukraine war had a trickle-down effect that devastated the entire transportation industry, but the trucking sector has been dealing with its own problems for years. A report by the American Transportation Research Institute highlights some of the chief concerns. Below is a list of the top 5 problems that the trucking industry dealt with over the course of the past year.
(Source: ATRI)
- Fuel Prices
- Respondents chose fuel prices as the number one issue facing the trucking industry, knocking off the driver shortage after five straight years as the top concern. The conflict in Ukraine is the single most likely reason for this shift at the top, as gas prices soared to astronomical levels by the end of May. Fuel prices cracked the top ten for the first time since 2013 when it ranked eighth overall. The impact of rising fuel prices was so pronounced that it jumped straight to the front of the line.
- Driver Shortage
- Although it’s no longer the number one issue facing the trucking industry, it took record increases in gas prices for it to drop to number two. This is the first time in five years that the driver shortage was not voted as the top issue. That being said, the shortage is still a major problem. The industry in 2022 faced a deficit of over 80,000 drivers, and it could grow to 160,000 by 2030.
- Truck Parking
- Often overlooked but never under-appreciated, truck parking placed third on the list of trucking concerns. It’s been a perennial top-five issue since 2015. The lack of parking has led to detention problems, layovers, and aggravates everyone involved, especially the driver. This issue is gaining traction with federal leaders, but for now, it remains a constant problem.
- Driver Compensation
- Driver compensation first made its appearance on the list of trucking industry concerns in 2019 and has remained a top-five issue ever since. Post-pandemic freight demand and a low supply of available drivers have led to some incremental increases in salary, but it continues to be a sticking point for prospective drivers.
- Economy
- From 2008 to 2012, the economy was a fixture among the trucking industry’s list of issues, but it fell out of the rankings entirely until 2017. After a pandemic, the Russia-Ukraine war, and a host of other geopolitical events, the economy is once again on the minds of the transportation industry. As inflation increases and the possibility of a future recession looms ahead, the economy may continue to be a staple in this list for years to come.
Carriers Struggle to Survive the 2022 Freight Recession
After nearly two years of continuous growth, trucking carriers were riding high on a plethora of freight demand and capacity. That all came crashing down in 2022. Our Year in Review shows spot rates declined by over 27%. The most jarring change was the cost of diesel. Following the Russian invasion of Ukraine, diesel prices jumped 36% higher than in 2021. The cost to run a trucking company skyrocketed this year. Many were forced to declare bankruptcy, including the following carriers:
- Marvin Keller Trucking (115 drivers)
- LandAir (135 drivers)
- UFI Transportation (213 drivers)
- Matheson Postal Service (383 drivers)
Avoiding the Great Rail Strike of 2022
Since the beginning of 2020, rail labor unions have been negotiating with the railroads for a new labor contract. The pandemic slowed talks for a time, but they resumed in earnest in 2022. After all that time, however, they still could not come to an agreement on a new deal. The discussions hit a breaking point around September 2022, the deadline for a new deal. With no progress being made, rail workers prepared for a nationwide strike that would’ve severely disabled the domestic transportation industry.
The White House, recognizing the seriousness of the situation, stepped in to broker a tentative deal to avert a strike. It worked for a time. The unions now had until December to ratify or reject the contract. As time went on, it became increasingly evident that the unions were not happy with the deal. Although it included salary increases and bonuses, rail workers demanded more sick leave. The rails refused to give in, and it appeared that we were once again on the verge of a rail strike.
Just ahead of the final deadline, the U.S. government stepped in once again to assist with negotiations. On the evening of November 30, the House of Representatives voted in favor of labor contract intervention and also agreed to implement guaranteed paid sick leave for up to seven days.
Was everyone happy and satisfied with the deal? Of course not. However, the new deal ensures that a rail strike will not happen any time soon, and the country’s railroads will stay operational.