Though there’s been year-over-year improvements, challenging conditions still prevail, according to Schneider National (CCJ Top 250, No. 6) and Werner Enterprises (No. 14) executives.
Demand expectations didn’t materialize in Q2 as planned, said Mark Rourke, CEO of Schneider, speaking at Morgan Stanley’s recent annual conference.
“Earlier in the year, we expected maybe some of that pull forward air pocket to happen in the second quarter. It really didn’t happen,” Rourke said.
The company is keeping its eye on September, a critical month that usually sets the tone for the rest of the quarter, and the intermodal market, which is heavily influenced by imports.
In trucking, demand has improved, Rourke said, with mid-single-digit increases in contract rates and some strength in spot market.
Conditions feel similar to the past few years, Rourke said, with greater uncertainty on the supply side, such as capacity issues, rather than on demand growth.
Werner also echoed similar sentiments of a better environment, but similar challenges.
“Q2 was certainly an improvement over Q1, and relative to where we were a year ago, overall, I think the fundamental trends are positive,” said Nathan Meisgeier, company president of Werner.
“It feels like things are a little better now than they were a year ago, but the setup is similar,” Meisgeier said.
Chris Neil, SVP of pricing and strategic planning at Werner, noted that customers have adapted to constant change as the new normal, particularly regarding tariff uncertainties that have created challenges throughout the year.
“Our customers have settled in nicely to this new normal for now," he said. "Whatever pent-up wait and see approach has really broken through.”
Capacity and regulatory impact
The executives noted how fleets are feeling the impact of regulatory enforcement on tightening supply.
The English language proficiency regulation had made a dent, not just around cross-border trade, but other areas of the country are impacted as well, Rourke said.
Neil also commented that they’re seeing more attrition in capacity due to ELP regulations, with an increasing number of carriers shutting down.
At the same time, stricter oversight of B1 visa drivers, which Neil said sometimes operate in ways that undercut rates and skirt rules, is seen as positive because it removes “shadow capacity” from the market.
Neil said Werner had always complied with ELP regulations and avoided reliance on B1 drivers.
“We’ve got a large cross-border presence, and we could figure out a way to do it. We just don’t think it’s worth the risk," he said.
Rourke said Schneider is also feeling the effects of the B1 driver Mexico situation.
"I could see upwards of 20,000 drivers at some point in my view have been operating in that configuration… As just the mere threat of enforcement has a deterring effect, the opportunities and the pipeline of those types just kind of turned on," Rourke added.
On the other hand, he said Schneider had improved its efforts in attracting female drivers into the fleet.
“We went from 7% to over 14% to 15% now, which we’re proud of,” he said.
New truck orders present another catalyst for capacity shifts that Schneider is tracking closely. Rourke noted that orders have remained below replacement levels for an extended period, which he views as evidence of tightening capacity conditions.
