Trucking: Tightening Circumstances

 

I wanted to share a recent article from Logistics Management:

Even a major decline in fuel prices will not keep trucking rates from climbing this year, says Stifel Nicolaus analyst John Larkin.  Provided the economy continues to grow at an annualized rate of 2 percent or more, it's projected that supply and demand should further tighten across the trucking industry in 2015.

"Rates should take another healthy low-to mid- single digit jump, " says Larkin.  "As the decade develops, shippers may long for such modest rate increases, as the full implementation of electronic logging devices and speed limiter regulations will effectively reduce trucking industry productivity while other driver specific regulations will further reduce the size of the driver workforce.

According to Larkin, shippers willing to work with carriers to optimize equipment utilization will have the best chance of mitigating rate increases in 2015.  He says that carriers are often willing to trade quicker turns of their equipment and drivers for no rate increase.  "Sadly, some carriers suggest that only about 20 percent of shippers were willing to collaborate in such a way during 2014, " says Larkin.  "Hopefully that percentage will increase in 2015."

Collaboration between railroads and truckers will continue, however, as both parties would rather not compete on freight moving in long-haul, high density freight lanes.  " Truckers will preserve precious drivers and expensive power units for freight that cannot move economically on the nation's rail intermodal network, " says Larkin.  "Meanwhile, intermodal will continue to handle some truckload overflow as railroads hustle to build and supply more capacity within the northern third of their networks. "