Extreme cold in Texas is whipping up demand for refrigerated trucks that can keep cargo from freezing
- Frigid conditions up demand for refrigerated trucks to keep products like beer at safe temperatures.
- Refrigerated truck capacity was already tight due to the pandemic and the start of produce season.
- The extra time to hire trucks and travel icy roads may lead to restocking delays and empty shelves.
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To the list of unusual results of frigid temperatures sweeping over Texas and the Midwest, add spiking demand for refrigerated trucks.
Spot rates — the prices given to shippers looking for trucks without a pre-negotiated deal — for refrigerated trucks were 22% higher Wednesday compared to the same week in 2020, according to DAT Solutions.
“As the temperature drops in markets, you can almost see a direct and immediate reaction in spot rates for refrigerated trailers go up,” said Dean Croke, principal analyst at DAT. In January, spot rates for refrigerated trucks heading from Chicago to Dallas averaged $2.34 per mile. This week, they are averaging $2.96 per mile, according to DAT.
In this kind of cold, Croke said, refrigerated trucks — known in the industry as reefers — can keep their cargo just warm enough so liquids like beer don’t freeze, expand, and explode out of their containers.
Which is why shippers looking to hire refrigerated trucks were up up 24% last week compared to the previous week, and the reefer load-to-truck ratio rose from 9.9 to 12.5 in the same time, according to DAT.
“I haven’t proved this scientifically, but it seems to be once you get to about 7 [degrees Fahrenheit] outside, that’s when I start to see major market movement,” Croke said. “Freight that would normally run on the dry market then flips over to the refrigerated market.”
This is especially true for food and beverages but also water-based paint and liquid pharmaceutical products.
“It mostly occurs in the perishables industry, but also with customers that move engineering materials, foam plastics, electronics, pharmaceuticals and, in general, any temperature-sensitive products,” said Antonio Echevarria, director of sales at Nuvocargo, a digital freight startup with expertise in trucking across the US-Mexico border.
Most sophisticated carriers and shippers of sensitive goods will use software and data services to understand when it’s necessary to protect cargo from freezing using reefers, so they’re not caught by surprise.
The temperature where a driver takes their break is key in this decision, especially overnight, as is the temperature at the destination where a truck may wait hours to be unloaded.
Refrigerated trucking capacity was tight before the current cold snap, though not nearly as tight as unrefrigerated flatbed trucks.
“It’s a relatively small fleet,” Mark Yeager, CEO of Redwood Logistics, said. “There’s not a ton of reefers out there.”
Consumption patterns weighted toward fresh foods for years, combined with the pandemic boost for deliveries of all kinds have driven demand. Plus, when the market for non-refrigerated truck space is tight, as it has been for more than six months, refrigerated trucks are hired out and run at regular temperatures — meaning the trucks are often in use even when load boards don’t reflect demand.
“They are operated at high utilization levels anyway, so any sort of incremental uptick in demand is really disruptive,” Yeager said.
There’s also an issue of timing exacerbating supply.
“What makes the situation more complex at this time is the fact that the extremely low temperatures have coincided with the beginning of the produce season,” Echevarria said. Berry production season starts in February and requires refrigerated trucks.
“This is expected to create major complications for producers that now face more competition for capacity than usual,” said Echevarria.
Grocery produce departments may take a hit in the coming weeks and months, but in the immediate-term, if shelves across the south are low on beer and soda, the tight reefer market is much more likely to be the cause than any issues with road conditions, said Croke.
“Truck drivers can go in any weather that they can see, feel, touch and smell. What they can’t drive in is when they can’t see, which is ice. So even now on the interstate trucks are rolling but a little bit slower,” Croke said. Further delays in getting products to shelves will come from icy loading docks and equipment without power.
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