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Despite Projected Increase in Shipping Rates, Freight Demand Remains High

 

Shipping RatesFTR’s analysis of the first quarter of the year projected a rise in shipping rates, which they don’t see going down even in the second quarter.

The shipping rates expected to rise include intermodal rates and spot rates.

Spot rates for shipping are also projected to be high this year in spite of typically being 10-15% lower than contract rates.

Freight demand at steady high

Despite the projected rise in shipping rates, the demand for freight remains high — which can prove to be problematic for shippers.

The FTR analysis noted that indicators of demand for goods were on the rise. A high demand for goods leads to high freight demand.

Strong manufacturing activity leading to a rebound in the demand for manufacturing and durable goods, which points to ongoing freight demand, was also noted at the beginning of this year.

The American Trucking Association noted a significant rise in trucking demand that started in 2017 and continued into the first quarter of 2018.

Because of the mentioned rise in shipping rates, shippers currently face the challenge of having to pay more to have their goods transported.

Capacity shortage

A capacity shortage happens as freight demand increases and freight exceeds truck supply. Shippers are then forced to take the additional measure of finding trucks to transport their goods.

These capacity constraints have the potential to overflow to less-than-truckload trucking, which also points to extra costs for shippers.

In addition to the steady demand for freight and the high shipping rates projected over the next few months, there is a continuing shortage of drivers that create capacity constraints.

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