Freight Update for 2018: LTL and TL Shipping

Facing increasing demand, less-than-truckload (LTL) and truckload (TL) carriers are signaling that insufficient capacity could lead to higher rates for the remainder of 2018. The $36 billion LTL industry in particular is expecting a record-breaking growth year, in part due to the rise of e-commerce.

Less-than-truckload (LTL)

The LTL freight outlook for 2018 is strong, with most analysts expecting that this year will surpass results seen in the last 10 years. Many shippers are planning to increase the amount of freight they ship this year. In a study sponsored by less-than-truckload carrier Averitt Express, over 1,600 LTL shippers were asked about shipping volume for 2018. Almost 76% of respondents said they would ship more freight this year. Many responded that rate increases were their biggest concern, with the percentage of shippers worried about lack of capacity rising from 11.1% in 2016 to 19.3% in 2017.

With higher demand, driver costs, equipment, and insurance, LTL is also experiencing increased costs to deliver to more remote areas.

Truckload (TL)

While LTL has many new entrants in the market, TL has a different model. Because of the high initial investment to create a hub-and-spoke, TL is a harder market to enter. More freight business is going to LTL because of shorter lead times, smaller loads, and the e-commerce boom. As some TL carriers no longer carry 5,000–10,000 pound loads, that freight has moved over to LTL.

Truck Drivers Wanted

At the same time demand for freight shipping is surging, truck drivers are becoming scarcer by the day. The ELD mandate that limits driver hours of service has further contributed to the driver drought. The lack of qualified, available drivers is one challenge carriers will need to figure out in order to keep up with the demand. This has been especially true for the TL market, where drivers are on the road for weeks at a time, but it is now an issue for the LTL industry too. Driver salaries will need to increase significantly to attract more candidates, particularly for TL drivers, who earn less than LTL drivers.

The tightened capacity in both LTL and TL will lead to higher prices for shippers, maybe by 5% or more. And that is not just on base rates — accessorial fees for services such as Saturday and inside deliveries are expected to rise as well. Shippers who are struggling to maintain service are looking elsewhere. Due to the limited capacity, some shippers might choose to move freight from trucks to other modes, such as intermodal rail and air. Intermodal rail is attractive because it is lower cost than long-haul trucks. Airfreight is an option because it offers fast delivery.

While the e-commerce business has affected the freight business, carriers will need to figure out how to meet the demand without continually raising rates. The driver shortage during this time of increased demand presents an even more difficult challenge for shippers and carriers in the industry.

If you enjoyed this post, please consider leaving a comment or subscribing to the RSS feed to have future articles delivered to your feed reader.

Related Posts