FLUCTUATING RATES IN TRANSPORTATION

This week, we will see public traded trucking and logistics firm report earnings for the second quarter and give their outlooks on the remainder of 2017. Throughout the month of June, we began to see market contraction – where demand far and away outstripped capacity – and pressure on rates increased.  Investors and the trucking industry itself have been looking for signs of an improvement after a two-year slump has delivered stagnant freight rates.

As of the last week in June, DAT reported that spot market rates for all three sectors of truckload, vans, reefers, and flatbeds saw increases in prices over the same period in 2016.  Van rates were up 11%, reefer rates were up 7%, and flatbed rates increased 10%. Often, spot market rates are a leading indicator of what may happen to contract rates.

Looming at the end of 2017 is the new ELD mandate taking effect. Will predictions of the small carriers and independent drivers shutting down, taking that capacity out of the market come to fruition?  Could an economy that is trying hard to grow itself out of the rut of the last several years and shrinking truck capacity be the perfect storm coming together at once? If that is the case, there can be little doubt shippers will see upward pressure on price.

What will be interesting is how freight-booking start-ups, like Convoy and Uber Technologies Inc., who recently launched trucking apps, will impact the market and rates.  The main reason for a shipper to consider using an app over traditional logistics and trucking companies is for cheaper freight costs. Will their entry into the market hold rates down?

As we continue to grow and expand our carrier base to bring additional shipping assets to our customers, we will be working hard to secure capacity and rate commitments.  We will be watching this week’s news with an eye out to the end of the year and be prepared to meet our customer’s needs.

All the best,

Jeff Beckham