Blog / LTL Rates Showing No Signs of Relief
2 minutes read

LTL Rates Showing No Signs of Relief

As the economy opens back up, the trucking industry is booming. Demand is soaring, and in May 2021, outbound spot rates in the US were as high as $2.79, a nearly 60% increase over spot rates in April 2020. As these rates continue to climb and less-than-truckload (LTL) freight shipping is facing capacity constraints, how can shippers respond? What factors are driving the rising costs and what can be done to mitigate them?

What is causing the LTL and freight shipping capacity constraints

The conditions we’re seeing today can’t be linked to one cause in particular. Instead, it’s the perfect storm of delays caused by February’s Polar Vortex in Texas, the impending ramifications of the Colonial Pipeline hack, and increased demand for online shopping due to the pandemic.

After receiving $700 million in Coronavirus relief, Yellow is using a portion of the funds to  replace trucks instead of adding to their fleet. Other carriers report a lack of drivers because more than 45,000 drivers nationwide lost their jobs after they failed the Federal Motor Carrier Safety Administration’s Drug and Alcohol Clearinghouse’s testing. The removal of tens of thousands of drivers ensures demand will continue to outweigh supply. 

In their First Quarter results press release, C.H. Robinson reports that their “NAST segment totaled $3.2 billion, an increase of 13.7 percent over the prior year, primarily driven by higher truckload pricing and an increase in LTL shipments, partially offset by a decrease in truckload volume.”

With the top 25 LTL carriers responsible for 90% of the marketplace, we can expect similar results as other carriers release their Q1 reports. Given the significant year-over-year increase, it seems unlikely that a pricing war will ensue– leaving shippers to pay the current spot rate.

What can shippers do about rising rates?

In a bullish market for freight, what are the rights and recourse for shippers? Now is the time to restock inventory and position your business as a reliable resource in a reopening economy. It’s not feasible to “wait out” the inflated rates. 

While spot rates can (and likely will continue to) inflate, contracts provide stable and predictable pricing for shippers– if you’re able to get them. In their Q1 Earnings Summary Call, C.H. Robinson admitted that “contractual business declined as we continued to pursue profitable volume growth by reshaping our portfolio through repricing the book of business with new and existing customers,” and has been working to reprice all of its contracts to reflect the demand and higher spot rates. Unlike parcel with few players in the market, there are literally hundreds of capable freight companies. Leveraging your company’s shipping volume against multiple carriers is still your best recourse to secure the best possible pricing. Allowing an expert to leverage it for you is even better.

Although we’re famous for our parcel solutions, ShipRx has solutions for all your shipping needs. Reach out to learn more.

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