Significant weather events, changes in the economy, and new regulations can all impact trucking capacity—a reality that often translates into higher truckload and LTL rates for shippers.
That’s exactly what’s happening as 2017 begins to come to a close. “Waves of disruption in available truck and rail capacity are radiating out from areas of the Texas and Louisiana Gulf Coast and Florida that took a direct hit from the two hurricanes,” William B. Cassidy writes in JOC.com’s Hurricanes threaten US-wide impact on freight capacity. “The economic aftershock is affecting freight flows and transportation pricing across North America.”
Rates on the Rise
According to Logistics Management, the first week of October saw a continuation of recent multi-year highs, with demand for truckload capacity already at a premium due to economic growth and seasonal freight activity.
For example, the flatbed load-to-truck ratio in September saw record flatbed demand, sending the load-to-truck ratio to 50.2 loads per truck—its highest mark in years. The average flatbed rate rose to $2.31 per mile in the first week in October, with the highest national reefer rate in almost three years at $2.37 per mile, and the load-to-truck ratio for the week at 12.4 loads per truck.
“The past couple months have churned up a perfect storm of supply chain pressure,” according to the most recent DAT RateView report. “Hurricane Harvey hit the Gulf Coast in late August, follow shortly after by Hurricane Irma. Fuel prices rose, and relief and rebuilding efforts lured trucks southward, leaving fewer trucks to handle fall harvests and move manufactured goods from ports.”
More Hikes Ahead?
Going forward, analysts see positive trucking across the boards, with rising rates spurring more demand for new Class 8 units as well, according to Trucker.com’s Freight rates poised for a big surge. It credits the hurricane impact plus the pending electronic logging device (ELD) mandate with driving the uptick in overall freight demand.
John Larkin, managing director and head of transportation capital markets research for Stifel Capital Markets, told Trucker.com that “in recent weeks truckload volumes and spot rates have remained strong, and contract rates began to move in a positive direction for the first time in a year and a half, though spot rates backed off slightly last week.”
“Motor carriers began to offer shippers a proposition: ‘We can lock you into a 2% to 3% rate increase now or you can deal with rates when the market further tightens once the ELD mandate is implemented in late 2017 and early 2018,’” Larkin continued. “That seemed to be generating some modest level of positive traction.”
Odyssey Logistics is tracking freight rates and capacity and will keep you up to date on the latest news surrounding these developments.
In the article, Trucker.com predicts a 5% to 10% hike in contract freight rates in 2018. “Combined with truck capacity exiting the market due to the impending ELD mandate, along with increasing replacement demand, the firm is raising its forecast for Class 8 production up 12% next year to 280,000 units,” the publication reports.