Skip to content
Search AI Powered

Latest Stories

Press releases are provided by companies as is and have not been edited or checked for accuracy. Any queries should be directed to the company issuing the release.

Parcel surcharge changes wring out additional revenue, LTL and truckload rates hold steady

Out-of-cycle parcel pricing actions drive greater yields, while rates in truckload and LTL stay flat as carriers hang on for freight cycle fundamentals to improve

Parcel surcharge changes wring out additional revenue, LTL and truckload rates hold steady

ATLANTA (April 9, 2024) – AFS Logistics, an industry-leading third-party logistics (3PL) provider, and TD Cowen announce the second quarter (Q2) 2024 release of the TD Cowen/AFS Freight Index, a snapshot with predictive pricing for truckload, less-than-truckload (LTL) and parcel transportation markets. The latest release of the index expects LTL and truckload rates to remain steady, consistent with trends established since Q2 of last year. In parcel, the index shows the effect of fuel surcharge increases and other accessorial changes to drive net rate growth in Q1 and Q2 2024, despite limited overall demand.

“While truckload and LTL markets are largely a continuation of established trends, parcel carriers have unleashed a wave of key pricing changes to raise revenue,” says Tom Nightingale, CEO of AFS. “After significant discounting to compete for falling package volumes last year, UPS and FedEx have deployed accessorial charges as more covert tools to increase yields, with changes to fuel, demand and delivery area surcharges targeted to boost revenue.”


Parcel: Discounting cools, off-cycle “GRI-style” pricing changes to boost revenue
As the parcel market continues to face sagging demand, both FedEx and UPS are prioritizing network improvement, cost reduction and targeted revenue generation through pricing changes. Carriers typically communicate updates to fuel and other accessorial charges as part of annual general rate increase (GRI) announcements, but in recent months, carriers have made several out-of-cycle changes. Since the 2024 GRI announcements, UPS and FedEx have increased fuel surcharges three times, boosted demand surcharges and expanded the delivery area surcharge (DAS) to more ZIP codes. With the addition of 82 ZIP codes clustered in urban centers that impact a full 1% of the U.S. population, the total number of ZIP codes subject to the DAS and considered “difficult or costly to access” by the carriers now represents more than half of all ZIP codes in the U.S.

The ground parcel fuel surcharge is based on the U.S. on-highway diesel fuel index, and express is based on the U.S. Gulf Coast kerosene-type jet fuel. As of March 2024, the jet fuel index is up 40% since 2021, but during the same period, the express fuel surcharge for both carriers is up over 100% for both carriers. A similar discrepancy exists for ground, with the diesel index up 22% since 2021, but the ground fuel surcharge for both carriers is up over 75%.

In express parcel, the effect of the GRI, fuel surcharge adjustments, a shift to more premium services and higher average billed weight more than offset carrier discounting to drive a significant net increase in cost per package in Q1 2024, jumping from 0.9% above the January 2018 baseline in Q4 2023 to 3.9% in Q1 2024. The index projects a slight increase to 4.1% in Q2 2024, in line with the “competitive but rational” parcel market described on the March FedEx earnings call, and an indication of carriers’ desires to move away from the significant discounting they had previously used in the fight for market share.

Ground parcel rate per package also saw a significant jump in Q1 2024, up from 23.8% in Q4 2023 to 28.8% in Q1 2024. Increased fuel surcharge and higher average billed weight fueled growth, and average discount remained flat after significant increases in previous quarters. In Q2 2024, the ground rate per package index is expected to reach 29.3%, nearing the index’s historic high set in Q1 2023 and reversing the trend of three consecutive quarterly year-over-year (YoY) declines.

Truckload: Rates remain low, but stable
In Q1 2024, the truckload rate per mile index fell slightly, from 5.2% above the January 2018 baseline in Q4 2023 to 4.9%. Cost per shipment continued to slide in Q1 2024, down 16.7% YoY and 2.0% quarter-over-quarter (QoQ) – consistent with established trends as a greater share of short haul shipments pushed down average linehaul cost. In the coming months, rate per mile is expected to continue bouncing along the floor established in Q2 2023, with the index projected as 4.8% for Q2 2024 – a slight quarterly decline, but the first YoY increase since Q3 2022.

LTL: Carrier discipline runs up against soft demand
In Q2 2024, the index projects LTL rates will remain at the escalated levels upheld since the Yellow collapse in Q3 of 2023, at 59.4%; above the January 2018 baseline and a 2.4% YoY increase. This expectation represents a modest 0.4% increase from Q1 2024, driven in part by anticipated higher fuel surcharges due to global crude oil production cuts. In Q1 2024, the LTL rate per pound index precisely matched the expectation set out in the last release of the index, declining slightly, from 61.3% above the January 2018 baseline in Q4 2023 to 58.9%. Data indicated downward trends for both weight and distance, with weight per shipment down 4.6% YoY and average length of haul down 7.6% QoQ.

About the TD Cowen/AFS Freight Index
The TD Cowen/AFS Freight Index launched in October 2021, offering a unique perspective on the transportation market through its dataset and forward-looking view. Expected rate levels are derived from visibility to over $39 billion of annual transportation spend across all modes and includes actual net charges that factor in accessorials such as fuel surcharges. Past performance and machine learning produce predictions for the remainder of the quarter, set against a baseline of 2018 rates for each mode.

https://afs.net/

The Latest

More Stories

Gather AI Expands Inventory Intelligence Solution into Freezer & Cold Storage Warehouse Environments
Gather AI

Gather AI Expands Inventory Intelligence Solution into Freezer & Cold Storage Warehouse Environments

Pittsburgh, PA – November 19, 2024 – Today inventory intelligence solution Gather AI announces its expansion into freezer and cold storage warehouse environments, an industry-first for inventory monitoring automation.

According to Grand View Research, the U.S. cold storage market size was valued at $40 billion in 2023 and is expected to reach $97 billion by 2030. This can be attributed to technological advancements in packaging, processing, and storage of temperature-sensitive items.

Keep ReadingShow less

Featured

VARGO® announces several vendor partnerships and client expansions in Q3 2024

Dublin, Ohio (November 19, 2024) — VARGO®, a leading provider of material-handling systems integration, warehouse execution software and equipment solutions, has announced several new vendor partnerships and customer advancements that are helping them to create efficiencies and empower fulfillment.

VARGO® and Tompkins Robotics have signed a mutual partnership, designating VARGO® as an authorized integrator of the technology. “Tompkins is an obvious choice in partner for us,” said Bart Cera, CEO. “Their robotics solutions are conducive to a weightless, continuous flow as well as being modular and quickly deployable. Their solutions have the ability to shrink or grow with the size of our customer’s operation which will allow us to utilize it often and in many different merchandise categories.”

Keep ReadingShow less
Seegrid joins Open Source Robotics Alliance

Seegrid RS1 AMR utilizing ROS 2 to perform manipulation task in industrial facility.

Photo courtesy of Seegrid

Seegrid joins Open Source Robotics Alliance

November 19, 2024 - Seegrid Corporation, a leading manufacturer of autonomous mobile robot (AMR) solutions for palletized material handling in the US, today announced its membership in the Open Source Robotics Alliance (OSRA), an initiative of the Open Source Robotics Foundation (OSRF). Through this partnership, Seegrid will contribute its industry-leading expertise through its active involvement in the open-source robotics community. The company joins a vibrant network of innovators, collectively driving open-source development for the betterment of the global robotics landscape.

As part of the OSRA, Seegrid will actively support initiatives that foster collaboration and shared knowledge across the robotics field. The company aims to participate in key OSRF activities, including the renowned ROSCon event, as well as on-line communities such as GitHub and ROS Discourse.

Keep ReadingShow less
Rich Egan headshot

Rich Egan, Averitt's vice president of international solutions

Averitt

Averitt names Rich Egan vice president of international solutions

COOKEVILLE, Tenn. – Averitt has appointed Rich Egan as the company’s new vice president of international solutions. Egan, who brings over 40 years of experience in the transportation industry and has specialized in international logistics since 1990, will assume the position held by the retiring Charlie McGee.

Since joining Averitt in 2019 as director of international solutions, Egan has played a pivotal role in shaping the company’s global logistics strategy. His expertise and commitment to service excellence have contributed significantly to Averitt’s growth in this sector. In his new role, Egan will lead the international solutions team and drive strategic initiatives to enhance Averitt's global logistics offerings.

Keep ReadingShow less

Conveyor Solutions, KVK, Electrical Services Group, SIM Aftermarket Services, and SIM Software, combine

Elgin, Il. - October 21, 2024 – Systems in Motion today announced that its new name and brand will be effective immediately. This name change is part of a rebranding initiative, but is also the culmination of the companies’ close working relationship for the past five years and represents their unified strength. Systems in Motion will continue to provide material handling services as a tier-one, turnkey material handling integrator.

The Systems in Motion name creates a single and powerful platform – one that embodies client and industry goals of moving forward – while understanding the complexities and unique objectives of every system. The new brand also signifies the culmination of investment in internal processes that streamline procedures, and deliver a seamless customer experience.

Keep ReadingShow less