The Wall Street Journal has reported that trucking companies are boosting prices amid a capacity squeeze. Reporter Jennifer Smith writes, “Truckers are enjoying more leverage on price, even as robust shipping demand may be leveling off.”
Trucking companies are flexing their pricing power, pushing retailers and manufacturers to pay more to buy into a strong U.S. economy and adding to inflation pressures in supply chains.
Third-quarter reports from major trucking companies suggest gains are being driven by tight capacity that is pushing shippers to pay more to move goods, even as volume indicates the high demand that flooded truckers with freight earlier in the year is leveling off.
Phoenix-based Knight-Swift Transportation Holdings Inc., the largest truckload company in the U.S., said a key measure of its pricing strength—revenue per loaded mile—was up 19.9% at its core trucking operations in the September quarter from the same period in 2017. Revenue at the Knight Trucking segment rose 31%, and operating profit at the unit increased to $56.5 million from $8.6 million.
Third-quarter revenue at Covenant Transportation Group Inc. —a large Chattanooga, Tenn., carrier whose customers include Amazon.com Inc. —rose 36.2% to $243.3 million, and its average revenue per total mile increased 16.4%.
Transportation companies have benefited from a more than yearlong stretch of robust shipping demand as strong economic growth pushes more freight through logistics networks. At the same time, tight capacity has given carriers more leverage on price, spurring double-digit increases in the long-term contract rates shippers negotiate with transport providers.
The prices are rising as truckers pass along higher labor costs, including higher driver pay and higher recruiting costs in what companies say is one of the tightest labor markets in years. Companies such as Werner Enterprises Inc. are investing in new equipment to help lure drivers in an “increasingly difficult” labor market that the Omaha, Neb., carrier said “limited our sequential fleet growth in third quarter 2018.”
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