Why Trucking Rates Will Be Higher in 2021

Since June, truckload and LTL volumes have exceeded 2019 levels as manufacturing, came back online. This year-over-year growth in volumes accelerated throughout the third quarter and looks to remain strong through the end of the year. 

The spike in truckload and LTL demand is driven by changes in consumer buying habits from experiences and services to hard goods that require shipping. Retail sales, excluding motor vehicles, reached record levels in August at $428 billion, according to the U.S. Census Bureau.  

E-commerce sales increased 45% year-over-year during the second quarter. The increase in at-home shopping has pressured supply chains and left many retailers in a struggle to replenish significantly depleted inventories. 

Census Bureau data shows the retail industry’s inventories-to-sales ratio sits near all-time lows. Many transportation industry analysts have pointed to the need for continued inventory restocking as a primary reason why demand for truck transportation will remain high for a prolonged period of time. 

Meanwhile, supply is likely to be constrained for some time. Carriers aren’t yet in a position to replace the capacity that left the market earlier this year. In addition, an acute shortage of drivers means there is no one to drive new equipment even if it became available. 

Analysts believe the supply deficit is likely to linger and that driver wage increases in the 15% to 20% range are required to get the number of drivers needed to meet demand. Analysts also think the current demand cycle could run longer than the historical average of six to eight quarters. If they are right, shippers can expect much higher rates over the next two years.  

Portions of this article come from "All signs point to a prolonged trucking rally" published by FreightWaves.