Will Celadon Bankruptcy Impact Truckload Markets?

Will Celadon Bankruptcy Impact Truckload Markets?

In the wake of Celadon’s bankruptcy news, Sunset’s vice president of sales and marketing, Tracy Meetre, provides insight into what’s next for truckload shippers, and what to expect heading into 2020.

Effects of Celadon Bankruptcy On National Truckload Market

2019 has been a challenging year for truck drivers and their employers. Approximately 640 trucking companies went bankrupt in the first half of the year, according to industry data from Broughton Capital LLC. That’s more than triple the roughly 175 bankruptcies from the same period last year. 

Even with the number of carriers exiting the industry, active capacity is up 10% over early 2018 – the fastest fleet capacity growth since 1999.   This metric indicates that there won’t be a huge market shift due to Celadon’s closing.  Expect spot market rates to increase in the short term, but rates should stabilize as Celadon’s business is absorbed by competitors who are poised to seize the opportunity. 

Expect capacity of Trucks vs. # of Loads to slowly even out in 2020, having a direct effect on rates shippers are paying.   A lot of factors contribute to this ratio; e.g. economic and trade implications, 2020 being an election year, anti-regulation sentiment in Washington, more bankruptcies, etc.  

Below is the past three (3) years truck to load chart that visually supports the factors listed above:

Furthermore, many industry analysts have reported on the matter, with early predictions as to how the exit of Celadon will affect TL market conditions:

Celadon will be the largest truckload carrier to file bankruptcy in history. The north-south truckload carrier has 2,695 trucks, including 2,000 in the United States, 360 in Canada, and 335 in Mexico. The company is a dominant carrier on the I-35 corridor, running freight from Laredo to the Midwest, with a large concentration in the automotive sector. 

The company’s bankruptcy and imminent shutdown will result in some capacity exiting the market at a time when the truckload market is struggling from over-capacity. Large enterprise carriers running similar networks to Celadon will find new lane opportunities and a pool of high-quality drivers. Third-party logistics providers specializing in cross-border freight like Forager Logistics should also benefit from a sudden removal of NAFTA capacity.

Related content: 
Celadon Group Shuts Down After 34 Years
Why Celadon is Filing Chapter 11 Instead of Chapter 7

This (news) is noteworthy because of the size of the fleet,” Donald Broughton, the principal and managing partner at Broughton Capital, told Supply Chain Dive in an interview.​ “It’s noteworthy because less than 10 years ago Celadon was known as one of the most active, prolific and successful at salvaging small fleets that were struggling and in trouble.”

The failure of Celadon represents the largest trucking failure this year and “certainly one of the largest in history,” Broughton​ said. ​The fact the company is initiating Chapter 11 willingly is also extraordinary, Broughton said. This type of action usually comes at the request of bankers who force Chapter 7, he said.

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Celadon Group Files for Bankruptcy, Ceases Operations