Huge impact on trucking markets

Source: JOC; Reuters; FreightWave; Reuters
Date: 2nd August 

After the news of a 99 years old, third-largest US less-than-truckload (LTL) carrier announced its closure, it immediately left tens of thousands of its customers, especially smaller businesses, looking for LTL capacity and facing significant rate increases.

Even shippers that didn’t work with them are likely to see LTL rates climb by mid-single-digit percentages, according to SJ Consulting Group.

It was reported that the closed LTL has stopped picking up freight prior to a threatened strike a week ago, and many large customers have diverted freight, which means less freight than expected may be stranded at the company’s truck terminals. It’s likely, however, that some freight will need to be “rescued.”

Other carriers, both LTL and truckload, will benefit immediately from the misfortune.

Huge impact on trucking markets
For LTL carriers, the closure will have the impact of a hurricane on trucking markets. Industry capacity will immediately drop while prices rise.

LTL freight demand, while depressed compared with 2022, was still “solid” in the second quarter. The pace of volume declines moderated each month as we moved through the quarter and have actually turned positive so far in July.

Some of the recent volume improvements may reflect a shift of freight away from the closed carrier to other carriers. Several large shippers told the Journal of Commerce that they began switching to other LTL carriers weeks ago when they heard and warned about the situation.

One of the retailers was not seeing increases from their other contract LTL carriers but they did have a carrier that was negotiating, mentioning they would have to raise their rates from the ones provided earlier in the bidding process. Price hikes are expected to pick up their pace.

Most experts believe there is enough capacity to handle the closed LTL’s freight, but they say costs to shippers will rise quickly as LTL capacity is likely to tighten quickly.

With freight demand down from last year, shippers had been leaning on LTL providers for smaller rate hikes, if not outright rate cuts. All of that suddenly flips upside down. It will now be mid-single-digit to high-single-digit rate increases.

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