Continued rate increases in 2019 isn’t what shipping and logistics managers want to hear heading into the new year, especially after the rate hikes they experienced in 2018, but the news isn’t all bad.
Prior to October 2018 many had 2019 rates predicted to hike dramatically. Those forecasts were largely based on the uncertainty of the NAFTA agreement and how a renegotiation could potentially (negatively) impact the transportation industry. Since that time, however, the NAFTA agreement has been renegotiated and is now being called the United States-Mexico-Canada Agreement (USMCA) and is being viewed by the American Trucking Association as good news. According to a truckinginfo.com article on the subject,
“The American Trucking Associations praised the governments of the United States, Canada and Mexico for “coming together on a framework for continued free trade” between the three North American nations. “ATA is pleased that the United States, Canada, and Mexico will continue their nearly 25-year-long tradition of free and open trade among North American neighbors,” said ATA President and CEO Chris Spear. “The wide-ranging pact is a positive step for the nearly 50,000 Americans working in jobs directly connected to cross-border trucking– as well as the more than 7 million Americans working in trucking-related jobs.””
That said, rates will likely still rise, but will hopefully happen at a slower pace and in lower incremental hikes.
Why Rates Will Still Rise In 2019
Even though the USMCA is a positive for the trucking industry, there are still a few other factors which will drive up rates in the new year.
Driver Shortage – This is an issue that’s been around for a few years now and it looks to be continuing into 2019. A lack of drivers means less trucks available to move freight. It also means longer wait and delivery times for some LTL and FTL shipments. This shortage is forcing trucking companies to get aggressive with driver pay rates in order to retain the drivers they currently employ. This increase in driver pay adds to the overall cost of transportation.
Increased Demand – It’s the simple law of supply and demand. There’s more shipping demand right now than there are trucks to move the freight. Increased demand means carriers can demand more money to ship them and customers are left with little recourse.
Positive Trends in LTL and FTL Shipping
In spite of the increase in demand and a continuing driver shortage, there are positive things happening in the industry which should help ease rate hikes in the coming years.
Younger Fleet – In order to keep up with demand, carriers have been replacing older trucks with new ones. Newer trucks can remain on the road, increasing their availability to transport goods.
Competition for Drivers – As we stated above, carriers are increasing driver pay. While it raises the overall transportation cost in the short-term, it will hopefully ease them down the road. Increased driver pay means not only retaining existing drivers, but will also attract new, younger drivers looking for career opportunities. As younger drivers replace older, retiring drivers, the fleet will grow and hopefully attract enough new drivers to meet the increasing demand.
Fuel Costs – Historically, high fuel costs have contributed to rate hikes. In recent months, however, and looking into Q1, 2019, fuel costs are down. While they won’t likely remain low for the whole year, it’s unlikely they’ll rise over average 2018 prices.
Partner With a Competitive 3PL
With some rate hikes expected in 2019, it’ll be on traffic managers to look for savings where they can. Partnering with a 3PL who can provide competitive quotes for LTL and FTL transport will help uncover those direct savings. Download a free 30-day trial of Amrate, an integrated or cloud-based LTL management software and see where you can save this year and beyond.