Industry analysts are continuing to try and quantify just how tight trucking capacity is getting in the U.S. freight market, with rate increases being used as one way to measure the severity of the current capacity crunch.
For example, research firm Transport Capital Partners (TCP) found that three-fourths of the motor carriers it recently polled said that they “think” freight is sitting on the shipper’s dock and as a result 68% expect to renegotiate detention times – almost double the number from a year ago.
“Recent changes in hours of service (HOS) rules have made detention times a hot button on driver efficiency and equipment efficiency,” noted Lana Batts, on of TCP’s partners, in a statement. “Unfortunately, it looks like larger carriers are expecting to re-negotiate more than their smaller competitors.”
Meanwhile, the trend of carriers using less broker freight services continues, noted Rickard Mikes, another TCP partner, with 76% of carriers indicating in the firm’s most recent survey that they intend to use less broker freight this year.
“This is a logical fall out from tighter capacity and rising rates, and a consistent trend since the end of the Great Recession,” Mikes added.
Research by Wall Street investment firm Stifel, Nicolaus & Co. indicates that the TL segment alone lost 20% of capacity during the “Great Recession” with motor carriers remaining reluctant to add capacity due to challenges associated with driver recruiting and retention.
“Some carriers are acquiring tuck-in or bolt-on carriers, thereby slowly consolidating a still fragmented industry,” the firm noted in its most recent transportation and logistics earnings preview. “But synergies can be elusive; objective is to obtain growth which is otherwise difficult to drive organically.”
Stifel estimates that HOS changes made in July 2013 continue to suppress capacity to the tune of 2% to 3%, despite easement of the 34-hour restart rule last year.
As a result, the firm said that general freight contract rates increased 4% to o6% year-over-year in the second half of 2014, with general dedicated rates going up 2% to 4%.
“A bigger [truck] supply shortage is likely on tap in 2016 and beyond when additional federal safety regulations begin to kick in,” Stifel noted, as a spate of other regulatory efforts – notably electronic logging device (ELD) mandates and potentially new speed limiter rules – start kicking in.
“There should be enough capacity reduction by 2016 to support another round of across-the-board, mid-single digit rate increases going forward, provided the [U.S.] economy continues to grow at least modestly at say 2% per annum or better.”