William B. Cassidy, Senior Editor | May 09, 2012 11:58AM EDT
Shippers that don’t monitor trucking costs carefully could see truck pricing skyrocket by 2014, Mike Regan, president of TranzAct Technologies, said Tuesday.
Trucking rates are primed to shoot higher, Regan said at the National Industrial Transportation League Freight Policy Forum in Washington.
“We’ve said it’s a real possibility that freight costs might go up 15 to 20 percent over the next two years,” he said in an interview with The Journal of Commerce.
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Just how high rates might rise depends on the economic recovery, but an increase in annualized GDP above 2.2 percent would bolster price pressure, he warned.
The lack of investment in new capacity by truckload carriers has “some ominous implications for shippers,” Regan said. “If you have constrained capacity and increased operating costs, what has to happen withrates?”
Regan, whose logistics management company works with thousands of shippers and carriers, noted that truckload costs are already up 6 to 8 percent from a year ago.
“Take a look at things like the Cass Truckload Linehaul Index that said truckload rates in March were up about 7 percent over (March) 2011,” Regan said.
Regan moderated a trucking panel at the NITL forum that examined factors pushing motor carrier operating costs higher, from tire prices to health insurance.
Regulatory changes such as the new hours-of-service rules will also cost trucking companies some productivity, driving costs higher, carrier executives said.
“Rob Estes (of Estes Express Lines) said today his costs are up 4 to 5 percent,” said Regan. “Just to recoup his cost increases his rates have to go up 4 to 5 percent.”
Companies that haven’t seen significant price hikes need to benchmark their rates and determine how what they’re paying stands up in the market, he said.
“When I first made that prediction last year, a lot of people got back to me and said ‘you’re crazy,’” Regan said. “They say, ‘that’s not been my reality, Mike.’
“If your rates are just OK, then the carriers may be only putting through 2 to 4 percent increases because that’s what they need in order to sustain the business.
“But if you’ve got legitimately top notch (low) rates, I don’t think its unrealistic to assume your going to be seeing 6 to 8 percent increases this year and next year.
“Add it all up and that’s 12 percent to 16 percent (over two years), and it could be 20 percent when you add in the cost of fuel,” said Regan.
Contact William B. Cassidy at wcassidy@joc.com. Follow him on Twitter at @wbcassidy_joc
