Shippers try to lock in low rates heading into peak season
Jeff Berman, Senior Editor -- Logistics Management, 8/31/2007
WALTHAM, Mass.—As available truckload and rail capacity has continued to rise over the course of this year, more than 50 percent of logistics, supply chain and transportation managers have been able to lock in lower rates, according to the findings of an exclusive online poll of nearly 480 Logistics Management readers.
Two key findings of the survey indicate that 64 percent of respondents think they will be able to take advantage of the current extra capacity situation with peak season beginning, although 62 percent state that they expect freight rates to increase throughout the rest of 2007.
While such a high number of respondents note that they expect freight rates to increase, the percentage breakdown of potential freight rate spikes is fairly one-sided. 64 percent expect rates to rise by 0-5 percent. And 33 percent predict a five-to-10 percent bump, and three percent forecast 10 percent or more.
“Our rates are holding steady [year to date] and we do not expect to see any increases in 2008,” says Ryan Boccelli, director of logistics for Stonyfield Farm Inc. in Londonderry, New Hampshire.
And with less volume being moved on the highways, Boccelli adds that Stonyfield has been able to take advantage of the current situation, explaining that he has seen a steady decrease in detention times and missed appointment fees this year, “which tells me there is less traffic through and to distribution centers.”
Boccelli’s findings are not entirely surprising in a year which has seen steady declines in volume on the highways and railroads, as evidenced by the monthly American Trucking Associations tonnage reports and the weekly Association of American Railroads freight volume totals. Also there have been myriad reports from industry experts and analysts noting that freight transportation is mired in a so-called “freight recession.”
With summer coming to an end, the ongoing dip in freight volume appears to be working in tandem to produce what the Stifel Nicolaus Transportation Group said is likely to be a “muted” peak season this year. Much of this sentiment, according to analysts on the Stifel call, stems from truck volumes and ongoing declines in the housing and automotive sectors on the truck side and year-over-year declines in intermodal and coal loadings on the rail side.
This feedback echoes what YRC Worldwide Inc. CEO Bill Zollars recently said in an Associated Press report, regarding current economic conditions heading into peak season: “I think the economy is a lot softer that what people are staying…The demand we expected has not materialized. We don’t foresee a normal seasonal peak—at least not yet.”
Eric Starks, president of transportation research firm FTR Associates, says that like last year, shippers will have the “upper hand,” albeit slightly, during peak season, although that does not necessarily translate into major rate spikes.
“I have a hard time seeing rates shifting one way or the other [heading into peak season],” says Starks. “Our analysis tells us that capacity levels are probably back to historical averages. The 64 percent [of shippers expecting rates to increase by 0-5 percent] is telling, because it is on the lower end of things, and my sense is that [truck] rates may creep up but only from -1 percent to 1 percent between now and the rest of the year.”
On the rail side, Starks expects a 3-5 percent rate increase for the rest of 2007, which, he says, is much better than the 8-10 percent range in past years.
View All On-Demand WebcastsShippers lock in lower rates
08/31/2007Cheaper Leaner Greener
11/01/2009
