Demand for trucking and logistics services is strong and continuing to soar, according to a variety of metrics tracked by Stifel Capital Markets, but if motor carriers expect this trend to lay the groundwork for rate increases, don’t hold your breath.
“Most shippers are not in the mood for rate increases, presently. Many are offering their carriers an opportunity to retain their existing lane awards provided rates remain flat at depressed levels or are sandpapered down further,” noted John Larkin, managing director and head of transportation capital markets research at Stifel, in a recent research brief.
“In short, the negotiating power still largely resides with shippers and not the carriers,” he added. “Shippers are aware of the risk of capacity reduction, associated with the ELD [electronic logging device] implementation, fleet downsizing, and an ever-worsening driver shortage. Yet they press on with strong demands for great service at low or even lower-than-low pricing.”
That recalls past comparisons Larkin made between such behaviors and the overall Neanderthal-like strategies many shippers remain engaged in.
Yet, all that being said, the “fundamentals” of freight demand are shifting, if slowly, back to motor carriers – and so we may be closing in on the long-awaited “tipping point” when freight rate power returns to the hands of trucking companies.
Here are a few freight metrics that illustrate this pending shift Stifel noted in “Week 9” or “W09” in the firm’s parlance for 2017:
Larkin noted that as things stand now, freight demand remains “neither good nor bad” for trucking. While inventories are moving towards targeted levels and some signs of industrial expansion are appearing, he explained that not all motor carriers are able to keep all their trucks hauling remunerative freight all the time at this point.
But that may soon change.
“When the market flips, it will be interesting to see if shippers that have not been unkind to carriers, will change their rate-only focus when supply and demand tighten,” he said,
If and when that happens, of course.