Freight rates continue their climb north in a year that has already shown a 28% increase in trucking spot quotes from Jan. 1st through March 23rd, according to a Bloomberg report. But the higher prices in freight transportation (and ultimately consumer goods) should not be unexpected. The northeast, for example, was embraced with three Nor’easters within the first two weeks of March, with seven of those states getting hammered with over 20 inches of snow, shutting down roads and hampering businesses.
On a greater scale, April 1st marked the start of authorities cracking down on electronic logging device violators, issuing out-of-services for any not caught utilizing the device. Those that do obey to ELD regulations must shut down for 10 hours after 11 hours on the road to rest. No doubt, an already tightened capacity and driver shortage is about to get even more restricted. In fact, it is already estimated that these regulations will “reduce trucking capacity between 2 percent and 5 percent by making it harder for drivers to cheat and squeeze in extra miles to reach a destination.” (1)
What does this do? Drive up rates of course. According to FTR Transportation Intelligence, not only are spot quotes increasing, but more stable contract rates are as well. Whereas this type of pricing increased an average of 3.9% in 2017, 2018 is expected to see a 12% rise in contracted rates. (1)
As many already know, the industry’s driver shortage is expected to grow to nearly 174,000 drivers by 2026, with a need of 890,000 new drivers to fill the gap due to retirement, demand, and retention, within the next 10 years, according to the American Trucking Associations. (2) But the problem is that while an 18 year old can acquire a CDL, he cannot travel outside the state until he reaches 21, which creates a barrier and turns many away from a driving career. But that may be coming to an end.
Last month, Reps. Duncan Hunter and Trey Hollingsworth introduced the Developing Responsible Individuals for a Vibrant Economy (DRIVE) Act, which would allow lowering the age of interstate drivers to 18 once they undergo a training program. (3)
The program would require the teens to complete a minimum of “400 hours of on-duty time and 240 hours of driving time, accompanied by an experienced driver.” (3)
Regardless of whether the law is passed, one thing is for sure. Shippers, consignees, and consumers should prepare to see higher costs this year both on and off the road.