High Over-the-Road Rates are Expected to Continue

Over halfway through the 2018 calendar year, U.S shippers can see no end in sight for high trucking rates.

As summer marches onward and the capacity crunch tightens under continually rising demand, shippers are being hit by record high rates and pricing. For the week that ended on June 23rd, DAT Solutions reported all-time highs for dry van truckloads, pushing the rate up one cent to $2.31 per mile, while similar rate increases have happened across all OTR modes. Year-over-year reefer rates for the month of May increased almost 25%, rising 50 cents from $2.02 to $2.52. Flatbed rates have moved almost in tandem with reefer rates, with year-over-year rate increases for the month of May totaling 63 cents, an increase of around 30% from ’17 to ’18.

There doesn’t appear to be any light on the horizon for shippers either. FTR reported in their Trucking Conditions Index (TCI), the current logistics market favors carriers over shippers to a high extent, with an April TCI index number of 11.5 (any reading over 10 is considered highly favorable for the carrier). According to FTR, “Carriers can expect the favorable conditions (for carriers) to improve further into Q3 and stay elevated well into 2019,” riding the wave of heightened demand and the ever-growing shortage of drivers. Across the board, the industry is experiencing bottlenecks, with DAT reporting, “Contract [truckload] rates have increased about 20 percent since last June, and rail intermodal has experienced crowded terminals and lack of drayage capacity.”

So why the record high pricing? Two months removed from the hard-enforcement deadline for ELD compliance, and deep in the produce season, we’ve reached a tough point for capacity in any given year, exacerbated by the national shortage of drivers. Lee Klaskow, senior analyst for transportation and logistics at Bloomberg Intelligence, summed the issue up poignantly, ““There’s a truck availability problem. The reality is there are not enough people to sit in the trucks to meet demand.” Growth in freight volumes, the continued repercussions of the ELD implementation and the extreme tightness of the labor market as a whole will likely carry these rates into the next several fiscal quarters, and possibly even past that. According to FTR, “The TCI will remain at near record levels until at least the fourth quarter, when the market may begin to stabilize due to additional truck capacity.” In the meantime, shippers will continue to deal with prices that have, quite literally in some cases, never been seen before.