We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • ABOUT
  • CONTACT
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC
    • Podcast
    • Webcasts
    • Blogs
      • One-Off Sound Off
      • Global Logistics and Risk
      • Empowering Your Performance Edge
      • Analytics & Big Data
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • CSCMP EDGE 2023
    • Upload Your Video
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
    • Mobile Apps
  • TRANSPORTATION
  • MATERIAL HANDLING
  • TECHNOLOGY
  • LIFT TRUCKS
  • PODCAST ETC
    • Podcast
    • Webcasts
    • Blogs
      • One-Off Sound Off
      • Global Logistics and Risk
      • Empowering Your Performance Edge
      • Analytics & Big Data
      • Submit your blog post
    • Events
    • White Papers
    • Industry Press Room
      • Upload Your News
    • New Products
      • Upload Your Product News
    • Conference Guides
    • Conference Reports
    • Newsletters
    • Mobile Apps
  • DCV-TV
    • DCV-TV 1: News
    • DCV-TV 2: Case Studies
    • DCV-TV 3: Webcasts
    • DCV-TV 4: Viewer Contributed
    • DCV-TV 5: Solution Profiles
    • CSCMP EDGE 2023
    • Upload Your Video
Home » Shippers warned of rising U.S. freight rates ahead
newsworthy

Shippers warned of rising U.S. freight rates ahead

May 10, 2012
Mark B. Solomon
No Comments

Users of transportation services need to get accustomed to U.S. freight rates rising "indefinitely," or at least through the balance of the decade, a leading industry consultant said Tuesday.

Noël Perry, principal of consultancy Transport Fundamentals Inc., predicted that rates for truckload, barge, and rail intermodal services will each rise between 50 and 60 percent by the end of the decade. Truckload rates could escalate by between 8 and 9 percent a year by decade's end, he told attendees at the Warehousing Education and Research Council's (WERC) annual meeting in Atlanta.

Perry said the current trend, which will reverse a 50-year downward slide in freight rates, began in 2010, when an unexpected mid-year spike in volumes sent spot truck rates soaring.

The sustained upward move to come will stun shippers that are used to, on balance, paying the same or less for transportation services on a year-over-year basis, he said.

"It will shock the crap out of a supply chain culture accustomed to [rates moving] in the other direction," said Perry, in his typical blunt-spoken manner.

During the period between 1950 and 2000, shippers benefited from cheap and abundant transportation service as the build-out of the interstate highway system gave truckers an incentive to pour enormous assets onto the roads.

In addition, the proliferation of information technology enabled truckers to operate more productively, while an increase in Americans entering the workforce, combined with low and stable oil prices for much of that 50-year period, tamped down labor and fuel costs.

Today, the calculus has been turned on its head. A shortage of drivers, higher oil prices, and the increase in the cost of complying with new government mandates will all be reflected in a durable increase in freight rates, Perry said. Trucking firms have likely wrung as much productivity out of their networks as they can, he added.

Perry said the changing climate will give asset owners significant leverage at the expense of non-asset-based companies like brokers and third-party logistics service providers, which for many years capitalized on an oversupply of capacity to play carriers off one another for the benefit of their shipper customers.

Shippers that have long relied on brokers and 3PLs to procure truck capacity, regardless of the situation, are in for a rude awakening, Perry said.

"If there is a major crisis, it will be in brokerage," said Perry, adding that transportation "is an asset business, and there is no easy way out."

HUGE OPPORTUNITY FOR RAILS

Perry's comments were echoed by Anthony B. Hatch, a long-time transport analyst who heads his own New York-based consultancy. "The owners of the capacity have value," he said. "If you have capacity and know how to use it, you will get paid for it."

Hatch, who is renowned for his coverage of the rail industry, said the challenges facing the truck supply chain present a huge opportunity for rails to grow their intermodal business both organically and in diverting market share from trucks. However, he couldn't quantify the market potential.

"It will be like the blind man and the elephant," Hatch said. "He doesn't know what it is, but he knows it's big."

Hatch said the continent's seven big railroads are allocating the equivalent of 18 percent of their revenue streams to capital expenditures. A large percentage of those resources are heading into intermodal operations, he said.

Also on Tuesday, the Intermodal Association of North America (IANA) reported that domestic container traffic in the first quarter rose 14.9 percent from the same period a year ago, an increase IANA called "remarkable."

In the report, IANA said that "while a rebounding economy helped boost volume," much of the quarter's gains can be attributed to market share growth, as trucking capacity was tight during the quarter and diesel prices resumed their rise after softening in last year's fourth quarter.

Domestic container gains were biggest in the eastern half of the United States, where intermodal faces more competition from trucking in many densely populated regions. More than 70 percent of the nation's population lives east of the Mississippi.

    • Related Articles

      Shippers warned of rising U.S. freight rates ahead

      Shippers warned to brace for LTL rate hikes

      Rates taking off in eastbound trans-Pacific market as tight capacity meets rising demand

    Marksolomon
    Mark Solomon joined DC VELOCITY as senior editor in August 2008, and was promoted to his current position on January 1, 2015. He has spent more than 30 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. He graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

    Recent Articles by Mark Solomon

    Coming together for road safety: interview with Joshua Girard

    Off the rails

    Freight rate spikes shaking up the C-suite

    You must login or register in order to post a comment.

    Report Abusive Comment

    Most Popular Articles

    • Intermodal groups applaud White House pick for new Multimodal Freight Office

    • MercuryGate acquires cross-border customs clearance specialist ITS

    • A new outlook that’s a lot like the old outlook

    • Rising tech firms target logistics challenges

    • Verizon: Employers struggle to balance cybersecurity with business imperatives

    Now Playing on DCV-TV

    1939a893 c406 4468 af9b 5bbb78acd8c1

    How Will Rate Increases from UPS and LTL Carriers Affect Your Freight Budget in 2024?

    DCV-TV 4: Viewer Contributed
    In the logistics industry, the task of quantifying cost increases from parcel and LTL carriers is becoming more complicated. We don’t expect this trend to end anytime soon, as these companies look for ways to use greater precision in their pricing by drawing on the greater amount of data available.

    FEATURED WHITE PAPERS

    • Exploring Forklift Energy Solutions for Maximum ROI

    • Identifying How Sortation Automation Can Address Challenges for Parcel Processors

    • Unlocking efficiency and growth

    • Quarterly Freight Data Report: Q3 2023

    View More

    Subscribe to DC Velocity Magazine

    GET YOUR FREE SUBSCRIPTION
    • SUBSCRIBE
    • NEWSLETTERS
    • ADVERTISING
    • CUSTOMER CARE
    • CONTACT
    • ABOUT
    • STAFF
    • PRIVACY POLICY

    Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing