A slowing freight economy combined with excess trucking capacity continues to give shippers some buying leverage in requesting lower rates from carriers.
As reported by CCJ magazine:
Shippers “continue to pound on rates,” financial research group Stifel Transportation noted recently. “No carriers will be totally insulated from…the rate carnage.”
On the flip side however, all-around rate decreases will eventually bite into capacity, Stifel notes. Such an effect could then result in upward pressure on rates down the road.
“…We may be approaching the limit on how far down prices can be pushed without harming the supply of capacity from the smaller carriers,” Stifel writes in its report. “Given their generally higher unit cost structure, when compared to the larger, better capitalized carriers, many of these carriers may fall out of the industry faster than they otherwise would have had the cavalcade of federal regulations been their only headwind.”
Some large carriers are cutting their fleet size to protect equipment utilization. Combined with the implementation of looming federal regulations such as next December’s electronic logging device mandate), a basement floor to the downward rate pressure could emerge later this year.