ST. LOUIS — During the month of November 5 On Your Side has been taking a deeper look into how 2022’s record levels of inflation and supply chain issues are affecting consumers and companies.
We checked in with one St. Louis trucking company who said the transport industry is facing more obstacles on the roads and rails in 2022.
We met with Nihad (Nick) Sinanovic, president of Vega Transport at the company’s truck lot and mechanic shop in Granite City, Illinois.
“From foods to plastic to packaging – really anything you touch, we move it. Furniture… you name it,” he said.
In 2022, business looks a bit different for Vega Transport.
“At the start of the pandemic, there was a slowdown in freight demand. But that only lasted a couple of months… After that, there was a big demand. People were buying all kinds of goods,” he said. “We were super busy for the past two years or so. Now, we’re seeing a slow down for freight demand… Inflation is a thing that touches everybody.”
Trucking companies are plagued by rising fuel and labor costs. Higher prices for things like lumber, steel, aluminum and polyethylene mean new equipment costs a lot more than it used to.
“We primarily buy trucks and trailers. Trailers, for instance, saw a 35% increase year over year… The difficulties were not just in prices, but sourcing parts and materials,” Sinanovic said.
He said it used to take the company about three months to get a new truck on the lot.
Now, it would take about a year.
“Supply chain [disruption] touches everybody,” he said.
Finding drivers to get behind the wheel has also been a challenge for the past year or so.
“Hiring drivers is the number one issue with trucking companies,” he said. “Now, we’re seeing a little bit better inflow of drivers now that the economy is slowing down.”
“We’re constantly recruiting. We’re seeing good results with bringing in the younger generation. It is a lifestyle but at the same time, there is local driving. Some people have this old perception that trucking is driving these old trucks and it’s not comfortable. Really, it has changed a lot.”
Once the drivers are secured, it’s time to hit the road and that means dealing with one of the biggest issues looming over the transport industry: the price of diesel.
We talked with Dr. Mitch Elliot, an economist and professor at Webster University about the spike in American diesel prices in 2022.
“Russia was a huge producer of diesel... with the embargo of Russia and the purchase of diesel fuel, refineries are pushing out as much as they can,” he said.
Over the past year, the cost of diesel has spiked more than 40%, compared to an 11% price jump for gasoline.
It costs about $60,000 for Vega Transport to fuel one of its trucks for a year.
Diesel costs are especially impactful for smaller trucking companies that aren’t able to negotiate fuel rates down or lock prices into a contract.
With a fleet of about 125 trucks, we’re told Vega Trucking has a fuel surcharge written into its contracts. So, it’s not as affected by fluctuating fuel prices.
Still, the company has found ways to make its trips more fuel-efficient.
“We’re only among 5% of trucks that use these wide-base tires. Instead of two tires here, we only have one. That saves 4% of fuel on an annual basis and that really adds up,” Sinanovic said.
The entire country is facing the risk of a massive freight railroad strike. Unless an agreement is reached, the strike could start as soon as Dec. 9.
If the rails shut down, we could see shortages in everything from gas to chemicals to cars and price hikes for consumer goods.
A rail strike would mean trouble for our national economy and major pressure on the trucking industry to ramp up transports.
Sinanovic shared his thoughts on the looming potential for a rail strike.
“I have not witnessed a railroad strike in my lifetime so I’m not sure what the effects will be. But, if there’s additional freight and business, we’re going to welcome it. We’ll be ready,” he said.