Editorial: Truck Freight Rate Head Skyward

The chickens are coming home to roost, in the form of notable freight rate increases in

he trucking industry, and especially from truckload carriers.

After years of small increases, higher fuel costs, skyrocketing insurance rates, escalating wages and benefits and the increasing costs of recruiting drivers are all adding up to an industry that desperately needs financial relief. And the nation’s ongoing economic boom is apparently setting the stage for the carriers to impose 5% to 10% rates increases, and to make them stick.

Between late 1998 and October of this year, the nation’s overall Producer Price Index rose 3.1%. And that was before the worst of the fuel price increases hit the pumps and before the rise in insurance rates went into effect.

During that same period, truckload carriers increased their charges to their customers by only 0.86%, according to the U.S. Bureau of Labor Statistics. When your costs rise by almost four times the jump in your revenue, you’re in trouble.

“What we see is a sick industry, and fuel has pushed a lot of people over the edge” said Kirk Thompson, president of J.B. Hunt Transport Services. As fuel prices remain near three-year highs, Hunt is seeking rate increases from 5% to 10%.

Swift Transportation’s Jerry Moyes said he’s looking for a 5% average increase, while U.S. Xpress’s Max Fuller said the company is after rate increases of between 6% and 7%. Fuller said the continuing capacity tightness means the company has been very successful at making its proposed increases stick.

In return for agreeing to rate increases, some shippers are demanding that carriers guarantee freight capacity for next year.

Analysts also expect pricing pressure to continue into 2001, if the economy continues to perk along and the driver shortage remains, since trucking’s already overwhelming share of the freight market is expected to grow.

Less-than-truckload carriers were more successful in recouping their increased costs during the year. The BLS said LTL rates charged to customers rose 4.4% during the 12 months, more than their average costs increased, according to the federal survey.

In all, it appears that the industry has the best prospects to make and maintain significant price increases since 1994.