The less-than-truckload (LTL) market is adjusting to a soft freight environment, triggering less volume, revenue and profits. As the U.S. freight economy weakened, LTL carriers saw a slip in revenue year-over-year. To date, the only large LTL carrier that hasn’t reported a decline in revenue is FedEx.
In the first quarter of 2016, LTL carriers posted a 3.1% rise in yields (revenue per hundredweight) despite a 2.7% drop in tonnage per day. Compare that with a 6.6% rise in yields on a 0.9% rise in tonnage per day in the first quarter of 2015.
Most LTL carriers said freight demand was better in July, but still reduced compared to a year ago. Stifel trucking analyst, David Ross, called the LTL pricing environment “a little more competitive than originally anticipated.” But, most LTL executives say pricing remains rational, even during the usually slow first quarter.
“Despite near-term headwinds from decreasing fuel surcharge revenue and an inconsistent industrial economy, we believe LTL pricing remains rational,” says James Welch of YRC Worldwide. “LTL companies are focused on evolution of the supply chain distribution process and getting an adequate return on the capital,” Welch continued.
LTL carriers have been able to maintain rates even with declining volumes. Some LTL carriers have even increased rates. The pricing ceiling grown by LTL carriers since the last recession and LTL price war appears to be holding firm despite the sluggish economy.
LTL carriers aren’t experiencing excess capacity like the truckload sector. 55% of shippers surveyed said LTL capacity was balanced. Only 6% expect LTL capacity to increase over the next 12 months, while 74% said they expect capacity to remain about the same.
Since LTL rates aren’t decreasing anytime soon, shippers can avoid extra fees and negotiate better base rates by working with a 3PL. In order to negotiate lower transportation rates, shippers should consolidate freight, leverage freight spend, highlight attractive freight and utilize the CzarLite Tariff.
Let the Experts Optimize Your LTL
Contact Us Now