Transport Capital Partners survey shows confidence among carriers for future volume and rate gains

Spurred by signs of future positive growth, recent data released by Transport Capital Partners (TCP) points to increased optimism for motor carriers in the form of increased volumes and rates.

In its fourth quarter survey of up to 200 carriers, TCP found that positive volume expectations among carriers are currently at 61 percent compared to 29 percent during the fourth quarter of 2012.

What’s more, TCP noted that expectations for volume gains were intact regardless of carrier revenue. Sixty percent of larger carriers (with more than $25 million in revenue) and smaller carriers (less than $25 million in revenue) each expect volumes to grow in the next 12 months compared to the previous 12 months, with less than ten percent of carriers at more than $25 million in revenue expecting volumes to decrease. Slightly more than 20 percent of carriers at more than $25 million and nearly 40 percent of carriers at less than $25 million expect volumes to remain the same for that period.

As for rates, TCP said smaller carriers are eyeing rate increases at roughly 65 percent compared to 60 percent for larger carriers.

TCP officials said that volumes and rates appear to go hand in hand, with solid GDP numbers in tandem with effective capacity are lowered due to regulations like CSA and drivers’ Hours-of-Service (HOS).

TCP explained in the report that if 5-to-10 percent of driver hours are reduced in carriers’ systems, then 5-to-10 percent more drivers are subsequently required to fill the gap—and with increased compensation. On top of that, TCP said carriers need to add more trucks, which in turn raises their level of fixed costs.

“You can measure capacity by a number of things,” said TCP Partner Richard Mikes in an interview, “but in a tight market if drivers are losing 5 percent of their time that is being conservative—and they then need to be paid 5 percent more. That is a real cost driver and carriers cannot simply hire 5 percent more drivers to drive the same truck. There is a real possibility that some portion of that some capital needs to be allocated to new trucks for future investment and growth. “

Carriers at the moment, explained Mikes, are of the mindset that current conditions really look good, but with the caveat that drivers and driver availability—and CSA and HOS—are the controllers of capacity in the trucking sector.

And with the increased pressure coming from government regulations, carriers really have no choice but to increase driver compensation, which will serve as a major catalyst for rate increases, he said.

With the new HOS rules only having been intact since January 1, Mikes said shippers have been receiving calls from carriers that previously were able to make previous delivery schedules on time and now they are either getting delayed or carriers are being forced to turn down the load. 

Even with the optimism provided in the survey’s data, TCP said that going back the last 16 quarters to February 2010, a large percentage of carriers have expected rate hikes but rates have only seen gains since the first quarter of 2013.