Nuts & Bolts

Rate Expectations

Logistics Management magazine hosted a very informative webinar on Jan 30th which featured a number of experts discussing managing costs via multiple modes. The speakers presented forecasts of rates and capacity in their respective areas of expertise. They also offered advice to shippers. Here are my takeaways from the webcast:

 

Trucking

  • Large and small  fleets are reducing fleet size but replacing older equipment with newer, more fuel efficient units resulting in not much change in overall TL capacity
  • Flat demand plus trend towards Supply Chain Optimization will delay capacity crisis in trucking industry
  • LTL rates hikes approx. 1-3% in 2014 if YRC survives and could be as much as 7-9% if YRC does not survive
  • Capacity issues may surface in 2016-2017 due to more restrictive regulations and driver shortages
  • Shippers are advised to develop partnerships with a small number of core carriers to maintain service levels if capacity does become an issue

Rail and Intermodal

  • Intermodal volume will grow 4-5% in 2014
  • Railroads continue to improve OR’s on the strength of intermodal
  • Although intermodal demand is up rate increases expected to be modest due to pressure on OTR rates
  • Shippers are advised to have contingency plans in place in the event of rail disruptions due to catastrophic events or natural disaster

Air Cargo

  • Load factors increasing
  • On shoring or Near Shoring trends worrisome to air cargo operators
  • Air cargo rate making differs by geography and capacity is the major factor
  • Fuel costs always a concern
  • Carriers will continue to replace older aircraft with newer, more fuel efficient, planes
  • Carriers will continue to manage capacity to control costs and improve load factors

Container Shipping Rates

  • Global supply/demand balance will not reach equilibrium until 2016
  • Excess supply continues in 2014
  • Rates, especially spot rates,  will be volatile as carriers manage demand
  • East-West rates will fall 1.5% in 2014
  • Global rates flat after falling 5% in 2013. Little change in 2014
  • Risk to shippers is carriers may skip sailings due to volatility but no real capacity shortage
  • Shippers  advised to develop relationships with carriers to ensure access to capacity

Parcel

  • Duopoly enables carriers to raise rates in 2014
  • FedEx + 3.9%
  • UPS + 4.9%
  • DHL +3.9%
  • USPS +2.4%