Truckload Rates in the US set to Skyrocket in 2020

Don’t look now, but rates for truckload shipping are expected to take an upward shift amid reports coming from the JOC Inland Distribution Conference held in November 2019. The forecast that was generated by these two organizations indicated a general likelihood of a rate increase, despite economic growth indicators on the contrary. According to the report, contract truckload rates are expected to increase shortly after Spring 2020 – or the second fiscal quarter.

Coyote Logistics indicated that a turning point is quickly coming; after 6-consecutive fiscal quarters of deflation, they believe the trucking industry will be headed toward an inflationary scope. This information was documented in their Coyote Curve Forecast. 

There are multiple reasons – beyond the laws of averages and financial trends, that indicate that truckload rates in the US could see an upward tick in 2020.

In this blog post, we’ll explore some of the details of Coyote and DAT’s forecast. We will also explain some of the ancillary reasons why shippers should be proactive about planning for shipping costs on full truckloads. Especially in the upcoming year.

Highlights of the DAT & Coyote Forecast

DAT Solutions is a spot market load board operator that predicts a five percent Year to Year increase in the typical spot truckload rate, and a 2% increase in contract rates. As contract rates lost two percent in 2018, their reporting indicates that they should receive those loses in 2020. However, this minor increase in truckload rates is a far cry from the double-digit spikes of 2018. 

The increases are expected to return shipping rates for truckloads to ‘normal’ – which is ending a decade of economic expansion since the recession of 2009. However, according to Coyote Logistics, a recession in the global supply chain will have very little impact on the expected shipping rate increase. 

 “A recession would have a dampening effect on the overall height of inflation, sending the market back toward deflation sooner,” stated Coyote in their forecast report. Many logistics leaders are calling for an increase in US economic growth of 2.1 percent in 2020 as opposed to a recession. 

The Impact of Capacity

Economic forecasts aside, the real issue that threatens all carriers – and will continue well into 2020, is capacity. The United States truckload market dealt with capacity issues throughout 2019, mainly due to the pending arrival of new trucks ordered the previous year.

The elephant in the room continues to be a shortage of drivers. It seems that more CDL drivers are aging into retirement or opting for only local LTL carrier routes. 

However, Coyote believes that capacity limits are not utilized effectively... especially in secondary market regions. 

“Enough capacity flight is happening relative to demand to put a floor under year-over-year rate deflation and start to bring the market to equilibrium,” Chris Pickett, chief strategy officer at Coyote, said in an interview. “That said, the market never bounces along in an equilibrium state for very long. We are almost always in a state of either supply surplus or supply scarcity.”

What Impact Does the ELD Mandate Have on Truckload Shipping Rates?

There are some that suggest that the pending ELD Mandate for data logging devices is likewise playing a role in the potential of shipping rates on truckload shipping. Most larger carriers have already recouped their investment for the software and hardware involved, trained people, and are using the platform actively. 

However, the smaller or independent owner/operator carriers are not that financially blessed. While the largest percentage of FTL movements are handled by the Top 5 carriers in North America, a good chunk of full truckload movements in the US are handled by smaller trucking companies. With added expenses for operating the ELD hardware and the restrictions on driver hours of service, trucking companies will need to recoup this cost of goods and services. 

How a 3PL Can Help Offset Increased Truckload Rates

Booking truckload, LTL, or other carrier movements on your own is a tedious and difficult task. Negotiating reduced shipping rates is a near impossibility – even if you can justify discounts based on volume and constant use. This is when a professional and large-scale 3PL can help negotiate reduced carrier rates – or even more importantly, keep annual rates consistent. 

This type of flexibility permits shippers including manufacturers, retailers, and others to better estimate, budget, and plan your fiscal budgets – year to year. If you’re a shipper looking to keep your truckload rates consistent through the year, contact Redwood Logistics.