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What Affects Truck Shipping Rates?

What Affects Truck Shipping Rates?

February 7, 2018

Industry News

Truck shipping rates are climbing amid recent developments in the trucking industry. It was a whirlwind year for trucking in 2017 and 2018 seems to be more of the same.

The volume of truck freight shipping is ever-increasing. In 2017, truck tonnage (the gross weight of freight moved by trucks) rose 3.7% compared to 2016, the largest annual gain since 2013.

Truck Shipping Demand Driving up Rates

Diesel price spikes, increases in manufacturing output, new regulations and tighter truck capacity have contributed to a steady rise in shipping rates. Indications don’t point towards a change in 2018 either.

Shipping Rates Rise as Diesel Prices Go Up

Diesel price increases have dramatically affected shipping rates recently. It’s no secret that fuel is a costly expense for any transportation service, especially those hauling oversize loads. Heavy-duty trucks are lucky to get around 5 mpg on the road, even with recent improvements in fuel-efficient technology.

Fuel alone makes up over 20 percent of operating costs for carriers according to the American Transportation Research Institute. A spike in diesel prices can be catastrophic to a carrier and dramatically limits their ability to operate.

Over the last year, we’ve experienced a steep increase in diesel prices. Since July 2017, diesel fuel prices have increased 22 percent to an average of $3.28 per gallon (as of June 1, 2018) according to the U.S. Energy Information Administration. This increased operating cost cuts dramatically into any potential earnings a trucking company can make.

Increased Outputs in Manufacturing and Construction

Due to the added need to move products, truck carriers are able to hold out or require higher rates as the bridge between supply and demand widens in 2018.

You might be noticing more and more products with the “Made in America” distinction. This is no accident. American manufacturing output increased 7% in the fourth quarter of 2017, and companies are planning on increasing production in American factories.

“I remain optimistic for 2018 for a host of reasons, including a pick-up in factory activity, better housing construction, solid retail sales, and an expected shot in the arm from the new tax law,” said ATA Chief Economist Bob Costello.

Ford announced it would invest $700 million to expand its existing factory in Michigan, while General Motors has stated it will spend an additional $1 billion on manufacturing in 2018.

The increase in production is not limited to manufacturing. Production of new homes built is expected to rise 10% this year according to the National Association of Realtors.

These production increases create more demand for truck capacity, especially for flatbed and specialized carriers. Keep in mind, that freight considered oversize, heavy haul, flatbed and open deck loads are not classified the same as standard dry van trailers (the standard box-like trailer you see on the road). This means that the ratio of loads-to-trucks isn’t going to be the same for all trailers thus, rates will be different as well.

Driver Hours Are Now Tracked Digitally – The ELD Effect

Truck drivers are on the road for extended periods of time and to limit the dangers that can arise from fatigue, the government has placed regulations limiting drivers to 10 hours of service daily.

The ELD mandate that went into effect December 18th has forced carriers to adhere to stricter schedules for their daily hours of service. Now that driver hours are tracked electronically, there is no way around operating beyond the 10-hour daily operating rule.

Carriers are mandated to record all hours electronically instead of finding a way to make the hours add up on paper. Now they begin searching for truck parking around the nine-hour mark in their day, a much earlier time than in the past.

The new ELD regulation has not only limited the number of loads a carrier can move but also what lanes can be traveled in a day as well. There is still a steep adjustment time for the industry since the mandate has only been active for a little over a month.

Keep in mind, the Commercial Vehicle Safety Alliance has allowed a grace period until April 1, 2018, before enforcing the use of ELDs. Things will get worse before they improve and rates could continue to trend up during this adjustment period.

Tighter Truck Capacity

There’s an inherent driver shortage that is greatly impacting the trucking industry. The American Trucking Association (ATA) estimates the truck driver shortage is around 50,000 drivers and that number could more than triple by 2026.

“In addition to the sheer lack of drivers, fleets are also suffering from a lack of qualified drivers, which amplifies the effects of the shortage,” Costello said. “This means that even as the shortage numbers fluctuate, it remains a serious concern for our industry, for the supply chain and for the economy at large.”

Driver retention has been an ongoing issue, especially for larger fleets. It has become increasingly difficult for fleets to find and retain quality, experienced drivers. This lack of available truck capacity has compounded the rise in shipping rates and the trend could continue.

Why Choose FR8Star?

Freight shipping rates on FR8Star are determined by live market data. We provide insights into truck shipping rates with accurate freight estimates that include all itemized third-party costs.

This means the price you see is all-inclusive with permits, pilot cars, and our standard transactional fee. FR8Star is fully transparent and won’t charge you for any additional fees.

With FR8Star, you gain access to 40,000 trucks competing to haul your freight, including oversize and overweight loads. We make life easier for shippers by automating your paperwork, payment processing and providing you with easy to use tools to manage your shipments. Our team of experts is standing by to help you along your journey.