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JOC | Rate ‘Roller Coaster’ Roils US Trucking Market

04.28.16 | William Cassidy, JOC

ORLANDO, Florida - U.S. shippers and trucking companies ride a pricing 'roller coaster' with more stomach-punishing ups and downs than the Coney Island Cyclone. Derek Leathers, president and COO of Werner Enterprises, would like to shut the ride down.

“I’m not casting blame, I’m questioning why we do it,” Leathers told the 2016 NASSTRAC Shippers Conference here Monday. He referred to what he called “aggressive procurement behavior” on the part of shippers looking to drive truckload rates lower in a soft market.

Leathers threw down a gauntlet in a room filled with customers and potential customers. However, shippers remember the rapid increase in truck spot and contract rates in 2014, price hikes which carriers said were necessary to pay higher driver wages and invest in new equipment.

“We knowingly and willingly go into these cycle shifts with aggressive behavior and there’s a better way,” he told NASSTRAC shippers, carriers and logistics providers. That better way involves collaboration to keep long-term shipping costs low and still provide remunerative rates.

There is still more capacity in the truckload market than available freight, thanks to overly optimistic forecasts more than a year ago and a record-breaking round of new truck orders and sales in 2015. Pricing power has swung back to shippers and they’re not afraid to use it.

Some would ask, why should they be? In an economy that expanded only 1.4 percent in the fourth quarter of 2015 and may barely have grown in the first quarter this year, companies of all stripes are under increasing pressure to reduce costs, and transport costs are a target.

Logistics managers have told JOC.com they are being told by CEOs and CFOs to pursue double-digit savings from transport operators, the kind of savings which can gut partnerships and imperil value-added services carefully developed through collaboration in recent years.

“All it takes is one executive to question why rates have not dropped as fast as fuel prices,” one shipper told JOC.com. “You have to explain there’s more to truck pricing than fuel costs.” But that push for savings is harder to stave off when transportation is considered a “cost center.”

The pressure on surface transport rates is evident in the Cass Freight Index, the Cass Truckload Linehaul Index and Intermodal Price Index, all measures of freight volume, shipper spending and pricing drawn from data from more than $25 billion in annual freight bills.

The Cass Truckload Linehaul Index dropped 0.6 percent year-over-year in March, the pricing index’s first negative reading since May 2010. The Cass Intermodal Price Index dropped 3 percent last month, following declines of 2.2 percent and 3.8 percent in January and February.

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