Subscribe to our free, weekly email newsletter!


Trucking rates poised to continue upwards, according to Transport Capital Partners’ survey

By Jeff Berman, Group News Editor
March 18, 2011

Even though the trucking industry appears to benefit from relatively healthy volume growth, there are enough obstacles in the way to make its future outlook somewhat cloudy. That is the consensus of a recent survey from Transport Capital Partners (TCP).

TCP’s Fourth Quarter Business Expectations Survey typically polls about 200 trucking executives on various industry-related topics to gain insight into what the market is thinking about on different issues, including demand, government regulations, capacity, and, especially of late, oil and gas prices, among others.

Some of the survey’s chief findings included two-thirds of executives indicating they are optimistic about growth in 2011, when it comes to volume and rate increases, and 45 percent of carriers stating they are interested in making an acquisition in the next 18 months, coupled with about 1 in 5 carriers showing interest in selling their business.

Another main theme was how capacity has been tightening, due to things like bankruptcies, exporting of used equipment, and fewer new truck purchases, according to TCP.

“Carriers are optimistic, because the economy is going to improve, but that depends on Congress and Wall Street not doing things that are not smart,” said TCP Partner Lana Batts. “Barring factors that nobody can control, carriers are feeling pretty good. The other side of that is capacity is so constrained, with carrier not buying replacement vehicles over the last three years and not expanding their fleets. As a result, the old law of supply and demand is going to play out. When capacity does expand, rates do go up.”

These rate increases, said Batts, are already occurring and are very apparent on the spot market, too. What this means for shippers is that motor carriers have no interest in adding capacity at this point.

Instead, she explained, they need to replace old trucks, because replacement costs for older vehicles are very high, and the actual amount of capacity carriers truly want to increase is miniscule. This is due to the fact that truck buying activity was quelled in 2008-to-2010, with the majority of truck buying activity occurring being allocated for replacement trucks only to a large degree.

“What the motor carrier industry is saying is ‘I have to take care of my balance sheet first,’” explained Batts. “And the fastest way to do that is by increasing rates, not by adding trucks. The reality is trucks today cost $120,000, whereas in 2006 it would have costs $70,000-to-$80,000. Today we are still seeing 2006 rates, which defeats the purpose of adding trucks if 2006 rates are still in effect.”

What’s more, the impact of CSA on truck buying activity and capacity is also significant. Batts said that a portion of carriers that received CSA-related warning letters from the Department of Transportation will shut down, resulting in lost capacity, coupled with low driver ratings, too.

And the heavily-contested DOT proposal to cut back on available driving time from 11 hours per day to ten also will remove capacity. This capacity will not simply be replaced by adding more trucks, according to Batts. Instead, rates will be raised.

On top of this are fuel prices that are flirting with $4 per gallon for diesel. If carriers slow down from 68 PMH to 63 MPH, it essentially removes four percent of available capacity, said Batts.

“All of these things coming together for the trucking industry are creating a perfect storm in a positive sense, with the only way for rates to go being up,” said Batts.

For related articles, please click here.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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!

Recent Entries

BNSF said that its 2015 capital expenditures will be allocated towards various areas of its business, including maintenance and expansion of the railroad to meet the expected demand for freight rail service, with 2015 representing the third straight year BNSF has invested a record annual capital expenditures investment.

While the ongoing labor negotiations between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA) ostensibly going from bad to worse, following the ILWU’s announcement late last week that it was halting negotiations from November 20 through November 30, a Congressional group last week penned a letter to PMA and ILWU leadership expressing concern over the state of the negotiations.

The ongoing themes of tight capacity and carrier pricing power are still in full effect, much to the dismay of shippers, based on the most recent edition of the Shippers Condition Index (SCI) from freight transportation forecasting firm FTR.

Information abounds about the growing trend of electric lift trucks and the advantages and disadvantages of the electric solution. Amid all of the information from so many sources, what's the truth about electric lift trucks? This complimentary white paper breaks through the clutter to review why electric lift trucks are gaining in popularity and also to review their challenges, as well as their economic and environmental benefits.

Three weeks after initiating a coordinated series of slowdowns that have mired the major West Coast ports of Tacoma, Seattle, Oakland, Los Angeles and Long Beach, the ILWU has pushed away from the bargaining table.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2013 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA