TCP survey: Rates up, fuel surcharge not covering costs
Both Batts and Mikes have heard carriers are more likely to assign trucks to shippers who will work with them to minimize turn around times and improve asset utilization.
The Trucker News Services
4/28/2011
DENVER —A majority of the carriers report that average freight rates in the past quarter continued to rise, so says the recent First Quarter Business Expectations Survey by Transport Capital Partners LLC.
Most of the rate increases were less than 5 percent, with larger carriers reporting more rate increases in the 1 to 5 percent range than did smaller carriers. However, smaller carriers reported more rate increases in the 5 to 15 percent range.
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But rates are not the complete picture, TCP noted: 70 percent of the respondents said fuel surcharges are not covering costs.
“This was up substantially from the first quarter last year when half said they were not,” said TCP Partner Richard Mikes. “This is not surprising given that during the time period the DOE reported fuel prices increasing on a daily basis and up 70 plus cents over the year.”
Larger carriers (those with more than $25 million in revenue) reported by a slightly higher percentage that fuel costs are out stripping fuel surcharge recoveries.
“This is obviously a direct operating cost increase that carriers are paying daily at the pump, but not seeing adequate compensation for all fuel consumed in a timely manner,” added Lana Batts, TCP partner.
The other side of line-haul rates are accessorials, the survey pointed out, with 80 percent of respondents saying accessorials would be on the table as well as rates in their renegotiations with shippers.
“Not surprisingly, the largest category targeted by carriers was fuel surcharges which rose from 13 percent saying this would be a topic in August 2010 to 30 percent saying it would be now,” said Mikes.
Detention times were the second most mentioned accessorial by 15 percent of the carriers.
“With equipment utilization tight and increased emphasis on compliance with hours of service, shippers are going to have to pay for tying up equipment and drivers,” Batts said.
Both Batts and Mikes have heard carriers are more likely to assign trucks to shippers who will work with them to minimize turn around times and improve asset utilization.
The TCP survey found that 40 percent of the carriers report that broker freight services account for less than 5 percent of their revenues and that 35 percent report 6 to 15 percent of their revenues from brokers.
Only a quarter of carriers rely on brokers for more than 16 percent of their revenues.
The trend reflects the traditional reliance on brokers by smaller carriers for return hauls as their outbound length of haul increases, and improved technology such as electronic load boards on cell phones, and laptops are available, TCP noted.
The survey shows that carriers under $25 million in revenue size use more brokers.
Both Mikes and Batts envision a potential shift over time to even a more direct connection between carriers, shippers and brokers with the advent of “real-time electronic bidding” on loads by prequalified carriers.
TCP, which specializes in transportation mergers and acquisitions, capital sourcing and advisory services, uses the quarterly survey to collect the insights and opinions of executives nationwide in order to report on the current state of the industry and future expectations.
Mikes and Batts, both with extensive experience in transportation, directed the survey and analyzed the findings. TCP couples the survey results with conversations they hold with carriers and others in the industry to present an insightful dialogue on key issues. More information is available at TCP’s website: www.transportcap.com.
Kevin Jones of The Trucker staff can be reached for comment at kevinj@thetrucker.com.
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