GREEN BAY, Wis. - Flat truckload rates, 1-3% rate increases for LTL carriers, increased trucking bankruptcies and declining truck sales are a few things Schneider Logistics experts see when looking ah...
GREEN BAY, Wis. –Flat truckload rates, 1-3% rate increases for LTL carriers, increased trucking bankruptcies and declining truck sales are a few things Schneider Logistics experts see when looking ahead to the remainder of 2009.
The company issued its annual State of the Transportation Industry Review 2008 recently, which also explored what lies ahead for transportation companies in 2009.
Looking at the US economy in general, Schneider is not expecting a rapid recovery.
“The consensus forecast remains weak with cautious optimism that freight demand may begin to turn by the end of year,”Schneider said in its report. “Although we may see the flattening and initial reverse of many of the major indicators at this time, we know that it takes approximately 3% annualized growth in GDP to drive freight demand to a point where the transportation industry is fully re-engaged. As of now, most economists don’t expect us to reach that 3% mark until mid 2010.”
The report suggests truckload rates will remain flat in 2009, since “we find capacity to be reducing slower than demand leaving an excess of capacity in the market.”
Schneider anticipates it may be 2010 before truckload carriers begin to see rates swing upwards. The news is a bit better for LTL carriers, who can expect a 1-3% rate increase.
“Even with industrial demand faltering and exports slowing, our forecast model calls for the inflation trend in LTL tags to peak in the first quarter of 2009,”the report suggests.
Overall, Schneider Logistics expects to see: an increase in trucking bankruptcies in the first and second quarters; a continuing decrease of diesel prices; the credit crunch and lack of cash weighing heavily on carriers; continued downward pressure on rates; and new truck orders falling to 2001 levels.
Wise shippers should be locking in capacity, according to the report.
“Shippers should not be lulled into a false sense of security that there is a lot of capacity,” the report warns. “Two thousand six hundred and ninety (2,690) companies went bankrupt or closed through mid- November, with more to come when licence tag payments come due in Q1…That kind of capacity drawdown will leave a major dent when the economy finally turns around.”
The report says shippers should be securing long-term contracts with their carriers to ensure they have the necessary capacity to move their goods when the rebound occurs.
“A critical strategy shippers should already have in place is working with their carriers to ensure they have contracts in place that will ensure adequate truck supply once capacity tightens again,” Schneider Logistics suggests. “Many shippers are not looking far enough ahead to recovery. If they don’t look at where carriers are going to be a year from now, they will see considerable delays because capacity will simply not be available. It will become critical that shippers align themselves with larger, asset based carriers that have the ability to add capacity.”
In Canada specifically, the report says “transportation and logistics firms, whose balance sheets are already weak, could be particularly vulnerable. We can expect to see further reductions in capacity over the next few quarters.”
While the declining value of the loonie and decreasing fuel costs are good news for Canadian carriers, they are offset by decreased demand in the US, a struggling auto sector and volatile fuel prices.
“Manufacturers and logistics providers’ alike need to evaluate their respective markets in 2009 and reflect on what it means to create real value in an economy,” Schneider says in the report. •
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