Why LTL Freight Rates Are On The Rise

Right now in the United States, e-commerce is at an all-time and generates revenue of just about $423.3 billion and this number is steadily climbing. As a result, truckload, less-than-truckload was also known as LTL, and parcel carriers have to make adjustments and changes to properly meet these numbers. Thus, there is a strong expectation that LTL freight rates are going to increase over time.

As previously mentioned, LTL stands for less-than-truckload and that name simply speaks for itself. There are plenty of shipments moved by this way of shipping and others. Understand that nearly 12 million trucks, rail cars, locomotives, and vessels move goods over the transportation network. Here are all of the facts on why LTL freight rates are currently going and will continue to grow over time.

Right now, the LTL market is believed to have a value of nearly $35 billion. This high level of value can point to the reason why LTL freight rates are slowly going. This excludes overweight shipping and specialty freight services. More often than not, LTL freight rates deal with LTL shipping services that are moving items by land.

In 2013, trucking transported nearly 15 billion tons of cargo. The Bureau of Labor Statistics reports that by 2040, that number is expected to increase to 19 billion tons. This means that there will be a strong increase in LTL freight rates as more and more shipments are moved by this method of transportation.

According to Satish Jindel, president of SJ Consulting Group, length of haul has declined. Public truckload carriers report that the average length of haul has decreased 4% between 2011 and 2016. While this may seem like it would reduce LTL freight rates that is not the case. The length does not matter as much as the value of the shipments and the number of shipments moved. The value of freight moved is expected to increase from $882 per ton in 2007 to $1,377 per ton in 2040, according to the United States Department of Transportation.

According to the Federal Motor Carrier Safety Administration, approximately 5.9 million commercial motor vehicle drivers operate in the United States. As the LTL freight rates rise so will the value of these workers and their work. So there are some benefits that directly rate to rising rates! The three most valuable commodities moved by the U.S. freight transportation system include machinery, electronics, and motorized vehicles.

Another reason as to why LTL freight rates are growing deals with properly managing and tracking these items. Machinery transport services are not cheap and when they are valuable they must be protected and tracked. Understand that spending in the United States logistics and transportation industry totaled $1.48 trillion in 2015, and represented 8% of the annual gross domestic product.

In Conclusion

Shipping rates are going to increase over time for a bevy of reasons but you should be sure to keep a level head. This is unavoidable as inflation, shipment value, and a number of other factors all play a role in this.


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