Domestic shipping is still seeing bankruptcy continuing in trucking, with the number of trucking companies filing for bankruptcy in May. In the last 30 days, more than 20 carriers filed for Chapter 11 or Chapter 7 bankruptcy protection. Chapter 11 is for businesses that plan on restructuring, and Chapter 7 is for complete liquidation. Along with smaller owner-operators with one to a few carriers, regional logistics providers have also filed for bankruptcy. Various factors have contributed to the bankruptcies over the last month, including the current war in Iran. This article explains why bankruptcy is ongoing and the impact it could have on the industry.
Why is Bankruptcy Continuing in Trucking?
A primary reason behind the bankruptcies is the ripple effect of the Iran-Israel conflict with recent US involvement. The war is near the Strait of Hormuz, a waterway that carries nearly 20% of the world’s oil and liquefied natural gas (LNG). As blockades began, global fuel costs rose significantly, and the higher costs were felt in the trucking industry. Along with fuel, operating, insurance, and equipment costs rose, and many carriers could not keep up. A decrease in customer demand has also contributed to the strain, with too many carriers choosing too little freight. Lower freight volumes also contribute to lower freight rates, meaning lower profits for trucking companies.
How Will the Bankruptcy Impact The Industry?
As domestic shipping increases in bankruptcies, it could be significant for the industry. Bankruptcy may persist amid lower freight demand, driven by higher costs and limited capacity. Along with the war, ongoing tariffs could further push up costs. Despite the negative impact, bankruptcies can also have a positive effect on the industry, including oversupply. As excess drivers leave the industry, this could help rebalance supply and demand. Fewer carriers mean shippers may face tighter capacity, which can help push up freight rates. However, if freight demand continues to decline in the coming months, analysts predict bankruptcies will persist.
Situations like trucking companies filing for bankruptcy can be alarming and potentially disrupt supply chains. Although it should not halt cargo movement, shippers should take appropriate steps to prevent disruptions like delays. An ideal step to take is to speak with a freight broker like A1 Freight Solutions. Brokers act as middlemen between shippers and carriers, coordinating the movement of goods on behalf of the shipper. They do this by providing services such as preparing paperwork, negotiating rates, and more. Brokers also provide consultation services for navigating any situation that may affect cargo movement. Speak to our brokers at info@fsinc.com or 786-756-8795 for a quote to move our shipment anywhere within the US.