Report: Shippers demanding rate decreases from carriers

Updated May 16, 2016
Estimates say the U.S. needs to invest between $100 billion and $150 billion a year into the country’s highway system, Graves said, well above the current $60 billion a year.

Under a brief investment report titled “Shippers continue to bludgeon rates,” by trucking financial research group Stifel Transportation comes this gem: A large dry van carrier recently told the firm that 90 percent of its customers have asked the carrier for a rate reduction.

The carrier said its customers cited the currently soft freight environment as reason why, and some shippers even threatened to pull freight from the carrier if it didn’t lower its rates.

Freight has indeed fallen off of late and the capacity crunch faced just 2-3 years ago seems to have played out.

See CCJ reporting here, here and here for more on those subjects.

However, Stifel noted, “shippers should be careful what they wish for” relative to rate negotiations, saying a wave of coming regulations on carriers will cut the industry’s productivity, driving a major tightening of capacity and applying lots of upward pressure on rates.

“The currently very loose supply/demand dynamic seems to confound the capacity crunch thesis which has hung around a little too long with little hard evidence surfacing so far. The shippers seem to argue that the industry always seems to adapt to regulations, rate pressures, overzealous brokers, labor shortages, et cetera. — and that they will happily deal with the capacity crisis, when, and if, it ever materializes,” the report reads. “Longer term, we think the weak rates and sluggish freight environment will exaggerate the supply/demand tightness that ultimately materializes.”