Trucking Rates Come Down a Bit but Problems Persist for Shippers
February 15 2018 - 3:45PM
Dow Jones News
By Jennifer Smith
Manufacturers and retailers are enjoying a breather from soaring
trucking costs, but many shippers say lingering problems in booking
big rigs point to more turmoil ahead.
Rates on the spot market, where companies book last-minute
transportation, have come down from record highs last month amid a
nationwide shortage of available trucks. Shippers have postponed
deliveries that aren't urgent or are moving more cargo by rail,
reducing pressure on trucking fleets struggling to hire
drivers.
But many shippers and trucking companies warn that the lull may
not last, for a number of reasons. The strong economy is boosting
freight demand. Produce distributors typically hire more trucks
starting this month to move crops from Mexico and Southern states
to grocery stores around the country. Full enforcement begins in
April for a new federal safety rule that requires truckers to
electronically log hours behind the wheel, potentially removing
some big rigs from the road.
Last week, the average spot rate for the most common type of big
rig was $2.17 per mile, down from $2.26 per mile in January, though
still up a third from a year ago, according to online freight
marketplace DAT Solutions LLC. Capacity remains tight, with about
seven loads per available truck for the week ending Feb. 10,
compared with 2.4 loads per truck during the same period in 2017,
according to DAT.
Heartland Express Inc., a large trucking company based in North
Liberty, Iowa, has been turning down an average 10,000 loads a week
from shippers like Walmart Inc. and Lowe's Companies Inc. The
turndown rate was about 500 loads a week at the start of 2017.
"We'd love to haul them but we don't have any drivers," Chief
Executive Michael Gerdin said. Carriers often have trouble
recruiting drivers, particularly for long-haul trucking where
drivers might spend weeks out on the road. And the tight labor
market has compounded the problem, with some drivers leaving for
construction or energy jobs that pay better or offer more time at
home.
Higher freight costs are weighing on corporate profits and
raising prices for consumers. On Thursday, wholesaler US Foods
Holding Corp. said the shortage of available trucks hurt its
fourth-quarter profits, and it will attempt to pass along those
costs to its restaurant and food-service customers in the coming
months. Last week, Tyson Foods Inc. said rising freight costs will
help push meat prices higher at the supermarket.
Cereal-maker Kellogg Co.'s logistics costs rose by double digits
in the fourth quarter, with increases in the high single digits
expected in 2018.
Tight capacity is giving trucking companies the upper hand in
negotiations over long-term freight contracts. Contract rates are
expected to rise as much as 10% in 2018. This week, Werner
Enterprises Inc., a large Omaha-based trucking company, moved its
guidance on rate increases to between 6% to 10%, up from 4% to
8%.
Some of the increases will go toward raising drivers' pay and
recruiting new operators, analysts say.
Some shippers are moving freight over to rail, benefiting
carriers that offer intermodal service to manage transportation on
both road and rail. The number of truck trailers moved by rail rose
10.3% in January from the year before, according to the Association
of American Railroads.
While shipping containers from the ports account for most
intermodal traffic, "in the domestic interior of the country,
everything from diapers to widgets is going intermodal," said Mark
Rourke, chief operating officer at Schneider National Inc., a large
national carrier based in Green Bay, Wis. The company plans to add
more trailers to its intermodal segment this year.
Cargo moves slower by rail than by truck, and service problems
have dogged some railroads in recent months, though carriers say
they expect metrics to improve as the weather warms.
Still, with big rigs and drivers in short supply, "the
intermodal environment is as strong as we've seen it in the last
four years," said Troy Cooper, chief operating officer at XPO
Logistics Inc.
--Heather Haddon contributed to this article.
Write to Jennifer Smith at jennifer.smith@wsj.com
(END) Dow Jones Newswires
February 15, 2018 16:30 ET (21:30 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Tyson Foods (NYSE:TSN)
Historical Stock Chart
From Apr 2024 to May 2024
Tyson Foods (NYSE:TSN)
Historical Stock Chart
From May 2023 to May 2024