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September 22, 2020 5:15 PM, EDT

Shippers Might Pay More for Cargo in 2021, C.H. Robinson Says

C.H. Robinson's CEO Bob Biesterfeld said air-freight capacity remains constrained.C.H. Robinson's CEO Bob Biesterfeld said air-freight capacity remains constrained. (Luke Sharrett/Bloomberg News)

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Shippers probably will pay more for freight heading into 2021 after the pandemic lockdown drove many small truckers out of business and cargo demand rebounds faster than the economy, C.H. Robinson Worldwide Inc. CEO Bob Biesterfeld said.

Demand for cargo shipping plunged in March when schools and offices closed to curb the spread of the coronavirus, sending many drivers to seek jobs in the construction industry, Biesterfeld said. The company has almost $20 billion of freight under management and contracts with 78,000 trucking companies. It ranks No. 7 on the Transport Topics Top 50 list of the largest logistics companies in North America, and No. 1 on the freight brokerage sector list.

The driver exodus has reduced truck capacity just as retailers begin restocking and freight demand snaps back, Biesterfeld said. Meanwhile, airfreight capacity remains constrained.

 

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“There’s going to be demand coming online that I believe will continue to drive market tightness and pricing inflation,” he said. On top of that, at some point there will be the need for distribution of a vaccine “like we’ve never seen before, and that will clearly create some logistics bottlenecks as well.”

Stocks of trucking companies and freight brokers have soared since May as cargo rebounded from lows. American Trucking Associations said in August that for-hire longhaul fleets have 3% fewer trucks this summer than a year earlier. Through July, trucking freight tonnage is down 3.2% this year, the federation said. Spot rates have soared 19% from a year earlier, according to a Truckstop.com market report.

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C.H. Robinson has gained 30% this year through Sept. 21, and Expeditors International of Washington Inc., a competing broker, has risen 13%. J.B. Hunt Transport Services Inc., one of the largest U.S. trucking companies, advanced 12% while a Standard & Poor’s index of U.S. industrial companies fell 6.7%.

 

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J.B. Hunt ranks No. 4 on the for-hire TT100 and No. 4 on the TT Top 50 list of the largest logistics companies in North America. Expeditors is No. 6 on the TT logistics Top 50.

C.H. Robinson’s profit has been squeezed as the broker pays more now for transportation for its customers, whose rates are locked in with annual contracts. New digital freight brokers, including Uber Freight and Convoy, also have put pressure on profits as the startups use price to lure customers, forcing legacy brokers to spend more to beef up their digital operations to compete.

As part of a five-year plan to spend $1 billion on technology, C.H. Robinson on Sept. 22 rolled out a service that allows shippers to match their transportations needs across routes the broker serves, instead of relying on annual bids for business. C.H. Robinson also recently partnered with Microsoft Corp. to make its digital freight quotes compatible with programs that companies already use for planning.

“The progressive incumbents and the digital upstarts, I don’t think those companies are going to look too different two years, three years out in the future,” Biesterfeld said. “Then the differentiator becomes really about scale, the data advantage and the integrated services we offer on a global basis.”

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