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Big rate boost projected for trucking

Nov. 11, 2014

Broad rate increases of between 8% and 10% are expected for the trucking industry no later than the second quarter of next year as a lack of truck drivers becomes not just a top problem among motor carriers but for the overall U.S. economy as well.

That’s the view of Rosalyn Wilson, senior business analyst with Parsons Corp. and author of the annual State of Logistics report compiled with the help of the Council for Supply Chain Management Professionals and Penske.

“We still don’t know why [trucking] rates haven’t significantly increased over the last two years, as the principles of supply and demand indicated that should have occurred,” Wilson noted in a conference call with reports arranged by Wall Street investment firm Stifel Nicolaus & Co.

She added that trucking revenues only increased 1.6% in 2013 – one of the weakest revenue increases in years – despite industry utilization being near or at 100% for most of that year.

“Rates were relatively flat in 2013 except for spot rates but now we expect substantial [rate] increases for the remainder of 2014 and into 2015,” Wilson stressed.

She pointed to port congestion – particularly on the West Coast, where 40% of imports enter the U.S. through the facilities at Long Beach and Los Angeles – as a growing problem, with drayage trucking capacity extremely tight.

“Larger, new-generation container ships are dropping too many containers on ports all at the same time,” Wilson added. “Freight growth is also occurring in corridors lacking sufficient capacity while traffic is declining on other corridors with surplus capacity.”

Yet the biggest challenge of all, she said, is the growing shortage of drug-free truck drivers that are compliant with Compliance Safety Accountability [CSA] program rules.

That’s because the uneven U.S. economic recovery has created additional pressure on the nation’s freight network as some regions of the country have increasingly become consumers rather than producers of freight, Wilson explained.

“This trend has led to imbalanced freight lanes, equipment surpluses in areas not generating freight and equipment shortages in areas generating freight,” she emphasized. “One has to wonder the extent to which our increasingly overburdened freight network can support the general economic growth.”

Wilson also pointed out that the first 10 months of 2014 represent the strongest performance for the freight market since the end of the Great Recession, with freight shipments up 11.2% and freight payments up 11.8%.

“I expect freight volumes to continue improving with no drop off in the fourth quarter,” she stressed. “That will mean more capacity problems for trucking and railroads alike, but especially for them both at the ports.”

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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