The closure of The Yellow Corp. is causing a ripple effect in the less-than-truckload industry as the transportation of goods shifts away from the company’s competitors. The Nashville-headquartered transportation holding firm, which had been in operation for nearly 100 years, ceased its activities on July 30 and subsequently filed for bankruptcy around a week later. The company had a strong emphasis on the less-than-truckload sector, operating through subsidiaries such as YRC Freight. As a result of its shutdown, the transportation volumes it used to handle are now being redirected to rival companies, and it’s anticipated that its assets will also be transferred to these competitors.
“There’s enough capacity in the LTL space to absorb the Yellow business,” said Kevin Day, president of the less-than-truckload business at AFS Logistics. “A lot of that has to do with just the slow progress that this all unfolded. It’s not this abrupt event that happened over a weekend.”
In its analysis of second-quarter earnings, TD Cowen highlighted that conversations surrounding the less-than-truckload (LTL) sector were largely centered on the bankruptcy of The Yellow Corp. The investment banking firm identified ArcBest Corp., TFI International, and XPO as the prime contenders to benefit from increased freight volumes. This projection is based on these companies’ comparable market presence and pricing strategies, positioning them favorably to capture a larger share of the freight previously handled by The Yellow Corp.
“There is ample capacity in the LTL network to absorb this freight, though it gives carriers the ability to be more aggressive on pricing despite a softer volume environment when excluding Yellow,” TD Cowen analyst Jason Seidl wrote in the report. “All carriers discussed the Yellow implications slightly differently.”
ArcBest observed a noteworthy 10% rise in its daily core less-than-truckload (LTL) shipments when comparing late July to the previous year. Meanwhile, Old Dominion Freight Line recorded a gradual growth of 3,000 shipments, resulting in a late July total of 50,000 shipments. Saia’s July shipment numbers displayed a 5% year-over-year increase, alongside a 2.5% surge in tonnage. In the case of XPO, the growth in tonnage gained momentum over the course of July.
“We have deep and trusted relationships with our customers and many of them came to us for help in keeping their supply chains moving as they began to fear or feel disruption,” an ArcBest spokesperson said. “We’re in a great position as an integrated logistics company because we can work with customers to look at their supply chain across modes to find the best options..”
Uber Freight highlighted in its Q3 Market Update and Outlook Report that the closure of The Yellow Corp. is projected to lead to a rise in less-than-truckload (LTL) rates. The report further anticipates that the industry will need several months to adapt and accommodate the increased volumes, given that The Yellow Corp. accounted for approximately 9% of the LTL market share.
“We came away most positive on the outlook for less-than-truckload companies, which is not surprising given recent developments at Yellow,” Deutsche Bank analyst Amit Mehrotra said in a report. “Saia disclosed that shipments increased 13% in the first two weeks of August and it appears volumes accelerated as the month progressed, implying an even higher exit rate.”
According to a report from FourKites, shippers had been gradually reducing their operations and putting backup plans into action in anticipation of the bankruptcy of The Yellow Corp. However, the report underlines a more significant apprehension: the welfare of the company’s workforce, which consists of around 30,000 employees.
“I think enough companies have really learned their lesson that contingency planning is critical,” said Glenn Koepke, general manager of network collaboration at FourKites. “The impact was, I don’t want to say minimal because it’s such a massive scale that Yellow is, but it went really well. The residual effect, I don’t think it’s really going to be shown for 12 to 24 months, and it’s really going to be dependent on demand.”
Koepke also mentioned that companies will strategically acquire both assets and personnel to align with their network needs, but the complete impact of this process won’t become evident until there’s a surge in freight demand. This is because numerous carriers are presently functioning with surplus capacity.
Carson Krieg, who oversees industry growth for Project44’s last-mile business, shared his insights: “Our retail partners have encountered challenges, especially when dealing with anything still within the Yellow network, as it often necessitates on-site interventions.”
Krieg further noted that freight demand has shown a subdued trend throughout the second and third quarters, resulting in limited capacity constraints. However, he anticipates an upturn in conditions during the fourth quarter as retailers finalize their carrier selections.
“I think there’s going to be consolidation among the national providers that are maybe apples to apples closer on price,” Krieg said. “I think you’re going to see an increase in volume in some of the people that may have been on par with Yellow.”
