Rates? It’s the Economy Stupid!

22 Dec by Stephen Estes

Rates? It’s the Economy Stupid!

  By, Stephen Estes 22 January, 2018   There is a lot of chatter regarding the exploding rates for shipping.  Everyone seems to have their own opinion about the cause for the dramatic per mile rate increases since the summer of 2017 following the August hurricanes.  

There are various factors, not the least of which being rising fuel costs, tight capacity, and the ELD mandate…  But the real reason? The Economy! The United States is experiencing a rapidly expanding economy, massive tax reform, shrinking regulations, foreign investment, increased manufacturing, increasing wages, and a growing new construction home market.  

Things are going well, and there is no sign they are going to slow down.  In fact – not only have the numbers far exceeded what strategists predicted but expectations are now that they will continue to soar.  So what has this done to the freight market? Well, as everyone can see – rates have risen like never before!

One of the great things about a recovering economy is the increase in goods and production.  But on the shipping side, it comes at a cost; the cost of higher rates to get your goods to market.  This is to be expected, but it is never a comfortable transition.  Soon we will be settling into a “new normal” where we can once again start to better prognosticate lane averages for our customers.  

But with the market being so volatile and fluid, it’s a rather hard thing to do now. This is unlike any January freight market in recent memory.  Demand continues to be much higher than normal, and capacity remains very tight; more so on some lanes than others, but nationally capacity is just generally tight.

There simply aren’t enough trucks to cover all the freight that needs to be moved and this drives rates up, up, up!

As producers begin to adjust their costs to factor in the higher shipping rates, the industry will start to settle back into some sense of normalcy, but in the meantime it is just a crazy market out there! One thing that separates PKI Logistics Inc. from the brokers, forwarders, and direct shippers out there is that we still never charge a commission on loads. So even in this volatile and difficult market, we are still able to save our partners money.

While most companies in the 3PL industry are increasing their fees, PKI has remained constant and will continue to do so.