LTL, or less-than-truckload shipping, is the transportation of cargo that does not need an entire truck. Unlike FTL or full-truckload shipment, LTLs are much smaller yet too big to be shipped by postal service. In 2022, the LTL industry has grown to a market size of over $103.5 billion in the U.S. However, recent activity has shown that the LTL industry has slowed down in the past few months. With the current trend, LTL carriers are wary of what the trucking industry will face in 2023.
The impressions of a declining industry stem from reports of popular LTL companies retrenching their services. A company responsible for 10% of the LTL market recently announced selling several terminals. This includes the sale or closing of nearly 29 carriers. Another of the top LTL carriers has planned to lay off an undisclosed number of drivers in early December. Other carriers have had similar stories of downsizing and delaying expansion plans, which shippers have noted. A belief is that the companies are preparing for a declining demand due to a possible impending recession.
Prices Still Remain Constant
Despite recent circumstances in the LTL industry, the shipping rates of less-than-truckload carriers have been steady. It was reported in October 2022 that dry van truckload rates had fallen around 7% since June 2022. Simultaneously, the LTL prices have risen approximately 2% at the same time frame. When dry van rates started declining in 2019, LTL rates started growing for over six months straight. The consistency over the last few years can be explained by several causes, including an absence of a strong market. Since LTL spot markets are minor compared to truckloads, the shipping cost can be higher.
Despite being half of the profits of the trucking sector, LTLs handle less than four times the volume. The barriers to entry for the LTL industry can mean a shortage of competitors which also prevents prices from lowering. Other reasons behind the consistent prices include increased demand to transport cargo because of the coronavirus. While the pandemic has slowed compared to a year ago, there is still an urgency to move goods. The war in Ukraine has also led to growing fuel prices which may contribute to rising rates.
What Does the Future Hold?
Although LTL rates have been steady, what will happen to the industry over the next few months may be uncertain. The downsizing of different carriers may be an indicator of something greater, like a potential recession. The rates may begin to lower due to fears of a downturn creating a decrease in demand. A possible slowdown may only be temporary and just a way for LTL carriers to weather the storm.
While a potential slowdown may concern shippers, it should not stop the cargo flow. A benefit that can come from the current LTL industry is that the costs for shipping may go down. However, getting in touch with a freight broker can also lead to finding the best prices for moving goods. If you need a quote to transport your shipment, contact A1 Freight Solutions at 786-365-9420 or info@a1fsinc.com. Our carrier network can move your freight anywhere domestically if you require LTL or FTL.