Fleets Seeking Rate Increases
December 9, 1999
Truckload fleets are proposing rate increases of up to 10% to counter the effects of higher fuel prices and labor costs.
J.B. Hunt is contacting customers this week about its plans to increase rates 5% to 10% over the next three months, according to the Wall Street Journal. Schneider National has been telling many customers that it needs rate boosts of 5% to 6% unless the customers can reduce the amount of waiting time at their shipping docks. Swift Transportation Co., Phoenix, plans to raise rates starting in the second quarter of 2000, but hasn't determined by how much.
Analysts say truckload carriers haven't been able to absorb mounting fuel costs, which are up 36% since February. James Valentine, an analyst at Morgan Stanley Dean Witter told the Wall Street Journal that even with implementation of fuel surcharges of 1% to 2% in recent months, operating margins for truckload carriers will be flat or down in the fourth quarter from a year ago.
With the high percentage of smaller fleets in the truckload segment, the jury is out on whether rate increases by the large fleets will hold. If they do, analysts believe many shippers can afford to pay them without passing increases on to consumers because they are saving big with just-in-time shipping and lower inventories.