The less-than-truckload sector is expected to get a significant boost in the next two years as the capacity crunch slows the truckload sector, e-commerce delivery demands grow further and manufacturing continues to make an incremental return to North America, says noted John Larkin, head of the transportation and logistics equity research group at Wall Street investment firm Stifel, Nicolaus & Co.
As reported by Fleet Owner magazine:
“It’s really all about putting more volume through the network to gain density, pickup and delivery density, economies of load factor in the LTL business,” noted Larkin, during a presentation to the Ozburn Hessey Logistics Carrier Affinity Conference back in May. “You build that network out and then start pumping more volume through it you get a lot of operating leverage.”
One reason the LTL sector has more “leverage” is that a little over 50% of the LTL market is controlled by five large companies, explained Larkin.
“That’s much more concentrated than the truckload industry, where your biggest carrier may have only 2% and depending on how you count it’s maybe as little as 1%,” said Larkin, who also points out the context that the U.S. LTL industry currently is only 12% as large as the truckload industry.
Regardless, Larkin noted that the LTL industry now actually has more volume than it’s ever had and he expects that growth to continue in the U.S. Furthermore, LTL prices are still increasing even though freight may be flat.
“There is not a lot of excess capacity and shippers are willing to pay up if they know in a couple of years we’re going to have a capacity shortage when ELDs and speed limiters are mandated,” he noted. “In the early days after de-regulation, LTL was being bludgeoned from all directions. But [now] the survivors have hit their stride and the future is really quite rosy,” Larkin emphasized.
Full story here.