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The Wall Street Journal: “Truckload Contract Prices are Rising, Report Says“

August 28, 2015

Truckload Contract Prices are Rising, Report Says

Trucking companies are extracting higher rates from shippers eager to lock in capacity ahead of the busy holiday season.

Shippers are paying more to lock in trucking capacity as they anticipate a let-up in the driver shortage will prove temporary, analysts say.

In a survey of 25 trucking companies, Stifel found that prices in contracts that lock in service for up to a year are up by low- to mid-single digit percentage points from a year ago. Shippers are willing to pay higher rates because they want to guarantee trucks will be available to carry their goods should a long-term shortage of drivers get worse, said John Larkin, the Stifel analyst who wrote the report.

Rates in the spot market, where shippers can hire trucks on short notice, have fallen in recent months, as more drivers have been free to haul goods. However, the rising contract rates indicates that availability may not last, Stifel said.

“Recent driver pay increases have marginally helped with driver recruiting and retention but not nearly enough to solve the driver shortage,” Mr. Larkin wrote.

Higher rates would suggest stronger revenue for carriers in the coming months, as contracts represent the majority of the trucking market, Stifel said. The run-up to the holiday shopping season is one of the busiest periods for trucking companies, which is why shippers are willing to pay extra to lock in capacity in long-term contracts.

Read more here.