The recent First Quarter Business Expectations Survey completed by Transport Capital Partners LLC (TCP) found that a majority of the carriers reported that average freight rates in the past quarter continue to rise. Most of the rate increases were less than 5%, however. The larger carrier reported seeing more rate increases in the 1-5% range than did smaller carriers. However, smaller carriers reported more rate increases in the 5-15% range.
But rates are not the complete picture, with 70% of the respondents saying fuel surcharges are not covering costs.
“This was up substantially from the first quarter last year when half said they were not. This is not surprising given that during the time period the DOE reported fuel prices increasing on a daily basis and up 70 plus cents over the year, ” said Richard Mikes, TCP partner.
“This is obviously a direct operating cost increase that carriers are paying daily at the pump but not seeing adequate compensation for all fuel consumed in a timely manner,” said Lana Batts, TCP partner. Larger carriers (more than $ 25 million in revenue) by a slightly bigger percentage reported that fuel costs are outstripping fuel surcharge recoveries.
The other side of line-haul rates are accessorials. Of the respondents, 80% said accessorials would be on the table as well as rates in their renegotiations with shippers.
“Not surprisingly, the largest category targeted by carriers was fuel surcharges, which rose from 13% saying this would be a topic in August 2010 to 30% saying it would be now,“ said Mikes. Detention times were the second most mentioned accessorial by 15% of the carriers.
Batts said, “With equipment utilization tight and increased emphasis on compliance with hours of service, shippers are going to have to pay for tying up equipment and drivers.”
Both partners hear carriers more likely to assign trucks to shippers that will work with them to minimize turnaround times and improve asset utilization.
The TCP survey found that 40% of carriers report that broker freight services account for less than 5% of their revenues and 35% report 6-15% of their revenues from brokers. Only a quarter of carriers rely on brokers for more than 16% of their revenues.
“This reflects the traditional reliance on brokers by smaller carriers for return hauls as their outbound length of haul increases and improved technology such as electronic load boards on cell phones, and laptops are available,” said Batts, noting that the survey shows that carriers under $25 million in revenue size use more brokers.
Both Mikes and Batts envision a potential shift over time to even a more direct connection between carriers, shippers, and brokers with the advent of real-time electronic bidding on loads by pre-qualified carriers.