A “trucker’s market” is likely for 2018, says prominent industry analyst

Truckload rates are soaring. Larkin recalls that he first witnessed “an inflection” in spot rates in mid-2016.

By ·

After much anticipation, “a trucker’s market” is due to finally arrive in 2018, says Stifel Nicolaus trucking analyst John Larkin, although he cautions that supply and demand is tight across the industry as the domestic economy continues to grow at a slow, steady pace.  

“The primary driver of the supply/demand tightness is the economy-wide shortage of skilled, blue collar labor,” he says. “It has become very challenging to find drug free, compliant drivers given today’s driver wages.  While driver pay scales began to rise in the 2nd half of 2017, the starting point for wages was so low, that it may take multiple wage hikes before we see any alleviation of this chronic challenge.”  

Larkin notes that on December 18, 2017 the Electronic Logging Devices (ELD) mandate will be fully implemented, and that this may “add insult to injury,” further compressing an already tight market.

Meanwhile, truckload rates are soaring.  Larkin recalls that he first witnessed “an inflection” in spot rates in mid-2016.  He adds that normally contract rate increases follow with a six-month lag.  Recently however, this cycle extended for over a year.  

“The 3Q17 hurricanes were the catalyst that tightened an already tightening market,” he says, “giving carriers the confidence to push for and receive upper single digit rate increases.  And, with the advent of the ELD mandate, additional rate increases may be forthcoming.”

This may be especially true for those shippers that treated carriers harshly in the 2H15 and 2016, says Larkin: “Some shippers abandoned their collaborative approach and then resorted to old fashioned rate reduction demands.  

As a consequence, the positive rate environment will cut across all the truckload sectors (i.e., dry van, reefer, flats, bulk, et. al.) and could have staying power unless autonomous trucks are pressed into widespread service. This scenario, adds Larkin is “unlikely.”

Also, a chance that an apprentice program – allowing 18 year-old-driver apprentices into the industry – comes into play is a longshot next year.

Less-than-truckload rates

Larkin observes that the less-than-truckload (LTL) industry, which is much more consolidated than the highly fragmented truckload sector, has seen rates rise modestly over the past couple of years, even as truckload carriers succumbed to widespread pricing pressure.  

“But, reports have surfaced recently suggesting that LTL capacity is becoming scarce in some regions of the country,” he says.  “It seems that LTL carriers are picking up some overflow freight from the truckload industry.”

In addition, LTL carriers are benefitting from the growth of e-commerce and the automation of manufacturing. Larkin says that with no new entrants, he expects some acceleration in LTL rate increases

Larkin’s final conclusions:

The tight supply/demand dynamic, outlined above, has developed prior to the implementation of any pro-business initiatives advocated by the Trump Administration and implemented by Congress.  With lower corporate tax rates, a comprehensive infrastructure plan, less onerous health care regulations, and, perhaps, an energy self-sufficiency initiative  — demand could well accelerate beyond its current levels, further tightening supply and demand while, perhaps, driving another round of sizable rate increases in the 2H18.  All in all, it should remain a truckers market for the foreseeable future, provided we do not slip into, what some would say, is an overdue recession.

About the Author

Patrick Burnson, Executive Editor
Patrick Burnson is executive editor for Logistics Management and Supply Chain Management Review magazines and web sites. Patrick is a widely-published writer and editor who has spent most of his career covering international trade, global logistics, and supply chain management. He lives and works in San Francisco, providing readers with a Pacific Rim perspective on industry trends and forecasts. You can reach him directly at [email protected]

Subscribe to Logistics Management Magazine!

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your entire logistics operation.
Start your FREE subscription today!

Article Topics

Logistics · Stifel · Trucking · All Topics
Latest Whitepaper
The Retailer’s Atlas for Omnichannel Returns
Fueled by e-commerce, the new state of retail is truly an omnichannel one, and companies will flourish or flounder based on how well their supply chain can meet customer expectations.
Download Today!
From the November 2017 Logistics Management Magazine Issue
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships into true, collaborative partnerships—and greatly strengthened its logistics and supply chain operations in the process.
34th Annual Quest for Quality Awards: 2017 Awards Dinner
Trucking Regulations: Washington U-Turns; States put hammer down
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Logistics Showcase: Rising to the same-day delivery challenge
Today’s delivery puzzles are very different than traditional DC to store or warehouse to DC puzzles. It’s not just the shorter time frame for delivery; the basic requirements are significantly different and more complex as well. In this session you'll learn how to address same day delivery challenges while also driving down costs and increasing customer satisfaction.
Register Today!
2017 NASSTRAC Shipper of the Year: Mallinckrodt; Mastering and managing complexity
An inside look at how a large pharmaceutical firm transformed its vendor and supplier relationships...
2017 Alliance Awards: Recognizing outstanding supply chain partnerships
In an era where effective supply chain collaboration is both highly valued and elusive, Logistics...

26th Annual Study of Logistics and Transportation Trends: Transportation at Digital Speed
While a majority of companies strongly agree that transportation is a strategically important...
34th Annual Quest for Quality Awards: Winners Revealed
Which carriers, third-party logistics providers, and North American ports have crossed the service...