US truckload rates post double-digit rise in 12 months

US truckload rates post double-digit rise in 12 months

Trucks travel on a US highway.

Trucks travel on a US highway. (Photo credit: Shutterstock.)

Dry van truckload rates across the United States were up 17 to 25 percent on average in January, compared with a year ago, according to the North American Truckload Rate Index published by the Trans-Logistics Group. The index, which is based on a mix of contract and spot market rates, confirms the assessment of other pricing benchmarks: rate hikes are on a roll.

“There is no place that rates are the same or lower than a year ago,” Charles W. “Chuck” Clowdis Jr., founder and managing director of Trans-Logistics Group, said. The group’s analysis of contract and spot market prices in 14,700 unique origin-and-destination-point lanes shows a surge in medium-range hauls and rates, lanes running 450 to 550 miles, Clowdis said.

Some of that was caused by e-commerce, he suspects. But the electronic logging device (ELD) mandate, imposed on truck drivers Dec. 18, also is lengthening and shortening lanes and exacerbating shortages of trucks, equipment, and drivers, throwing shipping networks out of whack. One reason capacity is tight is because capacity is not where shippers expect.

Trans-Logistics’ assessment of rising freight costs, especially in 450- to 550-mile lanes, corresponds to findings from Zipline Logistics, which determined the same lanes have been most affected by the ELD mandate, with transit days, a measure of transit times, increasing 16.2 percent, representing a 4 percent increase in costs, since the mandate took effect.

In comparison, the DAT Solutions average US dry-van spot rate rose 35 percent year over year in January, climbing 59 cents to $2.26 per mile. January’s spot rate exceeded the average DAT contract rate by 14 cents. That gap means truckload contract rates are likely to climb even higher, from high single-digit percentages to low double digits, according to most assessments.

Another measure of truckload pricing, the Cass Truckload Linehaul Index, dropped from 134.5 in December to 133.5 in January, but was still up 6.5 percent year over year, compared with 6.2 percent in December. The Cass Intermodal Pricing Index hit an all-time high of 141.4 in January, a 5 percent year-over-year gain and a 5.3 percent increase from December.

“In just the last seven months, our pricing forecast has increased from -1 to 2 percent, to 6 to 8 percent, and now we have reason to believe the risk to our estimate continues to be on the upside,” said Donald Broughton, managing partner at Broughton Capital and commentator for the Cass indices. “Contract pricing should keep rates in positive territory well into 2018.”

Rates: just the start of rising transportation costs

Rates are just the start of rising transportation costs. Longer transit times mean assets and drivers often are not where they are most wanted, trucking, intermodal, and shipping executives tell JOC.com. That is leading to the imposition of surcharges in certain markets, such as Chicago, as trucking and intermodal operators try to match up available capacity with demand.

For example, intermodal marketing company Hub Group told The Journal of Commerce it charges certain customers fees that might total hundreds of dollars to move freight not covered by contracts in certain highly congested markets, including Chicago, Los Angeles, Seattle, Dallas, and Atlanta. The charges are dynamic and depend on the cost of getting equipment.

“There are going to be times in which we will have to do unique things to provide capacity that comes with an additional cost, especially with surge capacity like the market we’re seeing today,” Brian Meents, Hub Group senior vice president of enterprise customer solutions, told The Journal of Commerce. The issue is being able to allocate drivers and equipment.

That is further evidence the disruption gripping US supply chains is multifaceted, going well beyond simple supply and demand dynamics. Surface transportation markets are likely to remain volatile as spring peak imports and retail sales converge with produce season and full enforcement of the ELD mandate, which will see violators placed out of service starting April 1.

Large retailers, “to a person will tell you they’re not going to run out of trucks,” said Mike Regan, chief relationship officer of TranzAct Technologies. “They’re going to pay what they need to pay to get trucks. … If large shippers are willing to pay above market rates to guarantee capacity, what does that say about what’s coming to the small to midsize shipper?”

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @wbcassidy_joc.