The State of Freight Shipping in the U.S.

The shipping industry looks to end 2018 with a strong finish. Ecommerce continues to grow and provide both opportunities and challenges for the industry. Coupled with strong freight demand, rates among all three sectors of transportation have been trending upward.

A study by Cass Information Systems, the Cass Freight Index Report, found that performance for the second half of 2018 for freight shipments and expenditures is exceeding expectations. The first seven months of the year have been strong, indicating the year overall will be a good one for carriers. Freight shipments have been increasing for 19 consecutive months, with expenditures having gained for 22 straight months, as of July.

Rising demand and tighter capacity within the industry have led to higher shipping prices over the past year. Even with investments by carriers in equipment and technology, however, some modes of transportation are still frequently experiencing limited capacity, which has led to this rise in prices.

Less-Than-Truckload (LTL)

The LTL sector is experiencing market conditions that are the best (for carriers) in many years. Retail demand coupled with tighter driver capacity has equaled explosive rate growth in the LTL segment. Those LTL carriers who have invested to expand their delivery network have been rewarded as well. Many LTL carriers are capitalizing on this growth period, despite the costs of doing last mile business. Increases in accessorial charges and dimensional pricing have created better margins for most LTL carriers as well.

Truckload (TL)

The TL market is struggling in many ways despite strong demand. While the positive rate environment has benefited all TL sectors — including dry van, reefer, flats, and bulk — the driver shortage is a serious concern for the industry. Adding to the challenge of an already tight (and shrinking) labor market is new driver regulations that limit drivers’ time on the road.

Those in the TL industry know that they need to figure out the driver situation soon. The priority is to replenish the aging driver population with younger drivers, and many carriers have started offering bonuses and other initiatives to this end. But even tactics like these are not increasing the driver population fast enough. The sector will continue to have capacity issues until this is resolved.

Small Parcel

The story in small parcel is still, and will continue to be, the ecommerce boom. As retail customers do more of their shopping online, the market for small parcel delivery will only grow. The annual GRIs from UPS and FedEx have become expected among shippers, with base rates rising about 4–5% every year. The 2019 announcements from both companies can be expected any day now. These will be on top of the slow drip of new fees and surcharges that have come out almost monthly so far in 2018.

It’s a good time to be a carrier. With a strong economy that shows little sign of slowing down, the good ones are all busy, rates are high, and margins are solid. As the industry moves into 2019, it will be interesting to see if the driver shortage eases and the trend of rising rates continues.

Ready to See Your Savings?



[type="datetime"]
[type="datetime"]