Tuesday, September 27, 2016

Take A Hike



LTL carriers continue raising rates despite soft demand.

Coming soon to a freight bill near you: rate hikes, as less-than-truckload (LTL) carriers pursue rate increases this fall, many earlier than in previous years – and despite weak demand.

Old Dominion Freight Line, the fourth-largest US LTL company, said on Sept. 13 it would raise general tariff rates 4.9 percent on average Sept. 26, reported the Journal of Commerce. The ODFL rate hike is the latest in a series of increases by major LTL carriers. YRC Freight,the third-largest US LTL company, raised its general tariff rates 4.9 percent on average Sept. 5. UPS Freight, the fifth-largest LTL player, raised rates 4.9 percent on Sept. 19, and XPO Logistics said Sept.12 it would raise non-contractual rates 4.9 percent on Sept. 26. Apparently, 4.9 percent is just the right increase, and all these companies arrived at it independently.

The majority of LTL freight moves under contract and won't immediately be affected by the general rate increases, but the general rate increases signal carrier resolve to increase pricing despite what's been a lackluster freight market in 2016. The carriers say they need to offset rising costs, while they themselves contribute mightily to rising costs for their customer base.
LTL truckers are raising general tariff rates despite a broad-based drop in shipment volume and tonnage. Of the large publicly owned LTL carriers, only ODFL and FedEx Freight had more shipments in the second quarter than a year ago, and ODFL's volume rose just 0.6 percent. Shipments at 11 publicly traded LTL carriers declined 2.2 percent on average year-over-year in the second quarter, while tonnage dropped 6 percent and revenue fell 4 percent on average.
Lower fuel surcharges helped drag down revenue at many carriers, and cut into revenue per hundredweight or LTL yield. But most of the large LTL carriers shrank their networks considerably in the wake of the 2008 to 2009 recession. As a result, there's not a lot, if any, excess LTL capacity, despite weak demand for LTL service. So the carriers are better positioned to hold the line on pricing, or, as we're seeing, raise it even as they move less freight.

If your rate increase hasn't been delivered yet, be assured, it's heading your way, and will be all the carrier feels the traffic will bear.

Kirk Shearer
President
TOTALogistix

800-989-0054 x103

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