Tuesday, January 30, 2018

Perfect Storm

Multiple factors align to push trucking rates upward.

Coming soon to a loading dock near you: significant upward pressure on truckload and less-than-truckload (LTL) rates.

Multiple factors are converging to point to a climate where trucking prices climb substantially throughout 2018 and beyond, said reports in publications from the Journal of Commerce to the Wall Street Journal. With the North American supply chain as a whole already in the teeth of a substantial shortage in truck capacity, strong economic growth is increasing demand, with more goods being produced and requiring shipment.

Retailers are replenishing stocks after one of the strongest holiday sales seasons in recent years, and in December, industrial production had the largest year-over-year gain since 2010, according to the Federal Reserve. Economic activity is increasing worldwide as well, and growth in global trade will fill more trucks in the US.

The new federal safety regulation requiring truckers to track their hours behind the wheel with electronic logging devices, or ELDs, is also increasing rate pressure, with prices shooting up on some routes that might now take two days instead of one because of stricter timekeeping.

January is typically a quiet month for freight. But in the first three weeks of January, national average spot truckload rates were higher than during the peak season in 2017, according to online freight marketplace DAT Solutions LLC. Analysts expect capacity to become scarcer in April, when produce shipments pickup, and full enforcement of the ELD rule kicks in.
Spot-market prices for dry vans are up more than 20 percent year-over-year, and analysts expect long-term contract rates that shippers negotiate with carriers to rise by between five to eight percent this year.

And after years of low fuel costs, diesel prices are near a three-year high. Throw in an ongoing driver shortage that is forcing carriers to pay more to keep drivers in their cabs, and the “perfect storm” analogy is hard to avoid. Many of these factors are here for the long haul, and truckers, long-haul or otherwise, will not be inclined to discount their rates in the months ahead. 

Kirk Shearer
800-989-0054 x103

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