The U.S. Department of Transportation says more trucks pass through Detroit than any other city along the U.S.-Canada border. In fact, an average of 134,000 trucks per month took this route in the first nine months of last year. Census data also puts the value of trade navigating between Detroit and Canada at somewhere around $125 billion.
However, this lucrative lane of trade between the two countries could face new challenges. By years end Canada is set to implement its own version of the electronic logging device (ELD). Consequently, this would curtail the time truckers can spend on the road.
It’s not just Canada who’s determined to regulate trucker time on the road. Mexico is also invoking a similar plan.
Officials cite this ELD mandate as the sort of ‘OPEC moment’ but for the transportation industry. According to George Abernathy, the Chief Revenue Officer of FreightWaves, the implementation of this regulation by Canada and Mexico will likely produce volatility in the market.
The pessimism expressed by Abernathy and others came at an event at Benzinga’s Detroit headquarters. Notables in the trucking industry were speaking on the new risk mitigation tool for the transportation industry. This tool is due at the end of March.
FreightWaves, in a partnership with DAT Solution and Nodal Exchange, will unveil Trucking Freight Futures contracts. This will allow shippers, carriers, and intermediaries to guard against changes in trucking spot rates.
The forthcoming ELD mandate, fewer drivers, and the boom of e-commerce have been among the variables affecting those rates. Unfortunately, these alone don’t account for the volatility, seasonal weather, regional demands like agricultural harvests which require prompt delivery are also instrumental.
The new Trucking Freight Futures contract is now priced at dollars and cents per mile. The contract was based on popular trucking routes in the U.S. Out of this data, the Department of Transportation will compile three regional averages and one national average rate.
Spot rates for dry van freight toggled between $1.52 and $2.11 per mile last year. Therefore, those wild price shifts make it difficult for big-time shippers to forecast or plan for transportation costs.
To drive this point home, officials noted that roughly 40 percent of companies in S&P 500 have declared freight and transportation costs the biggest threat to their earnings estimates.