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Hurricanes Cause Spike in Truckload Rates

Truckload rates spiked following hurricanes Harvey and Irma and will remain significantly higher in the months and maybe even years ahead.

Approximately 6% of the U.S. truck fleet has shifted from normal commercial activity to disaster relief and reconstruction. This will increase domestic transportation costs for shippers through the end of the year, according to the Journal of Commerce.

“Storms like these suck capacity out of the rest of the nation,” said Charles Clowdis, the Managing Principal for Transportation at IHS Markit Economic and Country Risk. Truckload rates in some lanes could rise 20%, Clowdis said, as capacity and pricing adjust to the post-hurricane economy.

The impact so far has been primarily on spot market rates. However, contracted rates have started to follow. The head of one national truckload carrier said contracted rate increases of 3% are “a lay-up,” and industry analysts say the increases could eventually come in closer to 8% if spot rates remain elevated past the end of the year.

This seems likely given the extent of the damage. Truckload rates saw a “storm effect” for 12-15 months following other large hurricanes such as Katrina.

Additionally, the trucking industry is dealing with other factors that have an inflationary impact on rates, including a tight labor market and an onslaught of new regulations such as the one for Electronic Logging Devices.

Rates in other modes, particularly LTL and rail, have also moved higher as demand surges for these services, too, and as frustrated truckload shippers look to alternatives for price relief.  

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