By Fello Logistics
The demise of Yellow in 2023 is impacting LTL rates in a very direct way. Because Yellow was such a big player, its disappearance has significantly decreased the capacity of the overall LTL carrier market.
It’s part of a longer trend that has seen the cost of LTL shipments rise, and put more pressure on carriers.
The Journal of Commerce reports:
Excess capacity in LTL is not necessarily a bad thing, however. LTL carriers try to build 20% to 30% excess capacity into their networks to keep freight docks from getting congested and to leave room to grow.
The cost per pound of LTL shipments has gone up nearly 60% since 2018, according to the TD Cowen/AFS Logistics freight index, Day said. “That’s a huge number to digest as a shipper,” he said.
In comparison, the AFS truckload rate index is only up 4.8% from January 2018.
“There are different cost drivers in the LTL space,” Day said. “LTL pricing is inflationary year over year and the only time I haven’t seen that was in 2008-2009.”
He said AFS Logistics expects LTL rates to rise 2.4% on average in 2024. Meanwhile, the company is seeing an uptick in LTL daily shipment volume, Day said, after a decline in shipment counts in 2023.
If shipment counts rise and carrier capacity declines, that’s a classic market dynamic to trigger higher rates. But there are some things to keep in mind.
First, despite Yellow’s exit from the market, there is still a lot of capacity in the LTL space. And Yellow recently sold the remainder of its 23 leased shipping centers to six other trucking companies, who will presumably use them to expand their own operations – thus bringing back some of the LTL capacity that was lost when Yellow ceased operations.
If demand continues to grow, the LTL carrier industry will likely find ways to meet the demand. But if we do get a 2.4 percent increase in LTL rates in 2024, that’s worth shippers’ attention.
The field remains highly competitive, and carriers looking to move in on Yellow’s territory are going to balance the opportunity to charge higher rates with the competitive imperative to win business.
When Fello negotiates carrier deals with clients who need LTL services, we are going to look for carriers who a) charge fair rates; b) have a track record of working well with us and delivering on time; and c) are more interested in long-term relationships than in taking advantage of the moment to hike rates.
We can’t guarantee that there will be no increases in LTL rates. That’s beyond our control. But we understand how the market works, and we know which carriers are most willing to make agreements that benefit everyone.
Carriers would tell you that the market in general – and the LTL market in particular – have been soft for the past year or so. They see the hike in rates as more of a “normalizing” factor. We certainly understand why shippers don’t see it that way.
We are working every day to get our clients the best rates and the absolute best service. Market dynamics always play a role, and the better we understand those dynamics, the better chance we have of getting the best outcomes for our clients.
Fello Logistics is known for integrity, reliability, industry-leading customer service and genuine care for it’s clients. Learn more about our freight shipping services.
