Anemic economy points to slow growth for freight rates: Dr. Saipe

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MISSISSAUGA, Ont. — General truck freight rates should grow at an average annual rate of 1%-2% through 2012,” Dr. Alan Saipe told transportation professionals attending the SCL-Nulogx breakfast conference entitled “Transportation Strategy: Planning for 2012 in Uncertain Times” yesterday.

Fuel surcharges should stay in the 15%-18% of the base rate range, unless crude costs rise sharply because of supply issues, Dr. Saipe added.

Dr. Saipe, president of Supply Chain Surveys, is the architect behind the Canadian General Freight Index (CGFI), published by Nulogx since September of 2009 with data going back to January 2008. The index tracks changes in over-the-road freight costs month by month and is derived from a large database of freight transactions. Costs include base freight charges, fuel surcharges and other accessorial charges. It includes domestic and cross border truckload and LTL transactions.

The index has shown generally declining trucks rates to June of this year. While domestic LTL rates have increased 0.3% compared to 2010, domestic TL rates are down 3.4%. Cross border LTL rates are down 1.3% and cross border TL rates are down 1.7%. Overall truck rates are down 2.4% to June of this year compared to the previous year.

(It’s important to note the CGFI is restricted to general over-the-road freight and does not include liquid bulk, dry bulk, forest products or other specialized freight. It also does not separate contract vs. spot market pricing.)

Fuel surcharges meanwhile have averaged 16.5% of the freight rate YTD to June for domestic LTL and 23.2% for domestic TL, according to the CGFI. The average fuel surcharge YTD to June for cross border LTL has been 19.6% while cross border TL has been 18.3%. Overall, the average fuel surcharge to June has been 18.7%.

Dr. Saipe noted that diesel fuel costs tend to mirror the price of West Texas Crude, adding that while most industry observers think there will be a steady upward trend in crude costs over the long term, “no one is really good at predicting these things over the short term.” His own prediction was for crude to come down to about $80 a barrel and to hover between $70 and $90 for the near future.

Barring any surprises, Dr. Saipe said, current economic realities will keep both fuel and transportation costs in check.

“A second recession is still possible, and slow GDP growth is expected for the next two years in the US, Europe and Canada. European sovereign debt problems have not been fully resolved and continue to threaten the global recovery….The consensus is that weak demand will affect pricing in the next 6-12 months. Eventually Asian growth will drive prices upwards,” Dr. Saipe said.

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