We use cookies to provide you with a better experience. By continuing to browse the site you are agreeing to our use of cookies in accordance with our Cookie Policy.
  • INDUSTRY PRESS ROOM
  • SUBMISSIONS
  • MEDIA FILE
  • Create Account
  • Sign In
  • Sign Out
  • My Account
Free Newsletters
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
  • MAGAZINE
    • Current Issue
    • Archives
    • Digital Edition
    • Subscribe
    • Newsletters
  • STRATEGY
  • GLOBAL
  • LOGISTICS
  • MANUFACTURING
  • PROCUREMENT
  • VIDEO
    • News & Exclusives
    • Viewer Contributed
    • CSCMP EDGE 2022 Startup Alley
    • Upload your video
  • PODCAST ETC
    • Podcast
    • White Papers
    • Webcasts
    • Events
    • Blogs
      • Reflections
      • SCQ Forum
    • Mobile Apps
Home » Forecast: parcel rates will remain elevated in Q2 despite drooping LTL volumes

Forecast: parcel rates will remain elevated in Q2 despite drooping LTL volumes

Carriers are using fuel surcharges and general rate increases to preserve profit margin in soft market, say AFS Logistics and TD Cowen.

AFS Screen Shot 2023-04-13 at 12.58.32 PM.png
April 13, 2023
Supply Chain Quarterly Staff
No Comments

Carriers will continue competing for freight volume in the second quarter, causing less than truckload (LTL) rates to bottom out after a sharp drop in the first quarter, even as truckload (TL) rates continue their decline, according to a forecast from AFS Logistics and TD Cowen.

Meanwhile, per-package parcel rates will remain elevated, thanks to record-high general rate increases (GRIs) from carriers, following the lingering strength of last year’s fuel surcharge increases, the firms said. Their analysis came from the Q2 2023 release of the “TD Cowen/AFS Freight Index,” a snapshot with predictive pricing for the truckload, less-than-truckload (LTL), and parcel transportation markets generated by the third-party logistics provider (3PL) AFS Logistics and the financial services firm TD Cowen.

“A year ago, rapid increases in fuel prices provided a pronounced mechanism for carriers to earn windfall profits. However, while diesel prices fell to their lowest level in over a year, certain carriers continue to [eke] out disproportionate profits from their revised fuel surcharges,” Tom Nightingale, CEO of AFS Logistics, said in a release.

Decreasing fuel prices are having a limited impact on ground and express parcel rates, but parcel fuel surcharges have not fallen to the same extent as the actual fuel price indices. For example, since fuel surcharges peaked in Q2 2022, the on-highway diesel index has dropped by 18% while ground fuel surcharges only dropped 13%. By another measure, the U.S. Gulf Coast kerosene-type jet fuel index dropped 22% over the same timeframe, but express fuel surcharges only decreased by 19%.

“The multiple fuel surcharge increases announced last year and the recent record-high GRIs continue to be effective tools for carriers as they seek to maximize per-package yield in the face of falling volumes,” Micheal McDonagh, president, parcel, AFS Logistics, said in the release. “Another important factor to consider is the prevalence of small- and medium-sized shippers, who do not get the discounts that larger customers do for fuel and other accessorial charges. While carriers are willing to negotiate and offer pricing relief to fill capacity, they still have several potent ways to capture revenue, such as pursuing those more profitable segments of customers.”

Despite those pricing strategies for the parcel sector, falling freight volumes have exerted their usual impact on the LTL sector, the report found. In the first quarter of this year, the LTL rate per pound index experienced the most significant quarter-over-quarter decline on record, dropping from its historic high of 64.0% above the January 2018 baseline in the fourth quarter of 2022 to 57.0% in the first quarter of this year. That sharp decline can be attributed to declining diesel fuel prices and excess capacity exerting downward pricing pressure, AFS and TD Cowen said. 

And in turn, those conditions could provide clever shippers with some relief from high parcel prices. “As carriers look to fill excess capacity and maintain revenue, prudent shippers can find major cost saving opportunities by looking beyond traditional LTL services,” Kevin Day, president, LTL, AFS Logistics, said in the report. “Volume LTL is a tool for carriers to get some incremental revenue out of backhaul lanes that would otherwise have them moving empty trailers, while giving shippers the opportunity to take advantage of significantly lower rates and avoid the added sting of steep accessorial charges.”

 

 

Parcel Trucking
KEYWORDS AFS Logistics TD Cowen
    • Related Articles

      Forecast: import container volumes will remain “well below” last year’s levels through the fall

      Forecast says U.S. drayage rates will continue to rise in Q1

      Surprising LTL strength, falling truckload rates and parcel GRI impacts: Q1 Cowen/AFS Freight Index

    Recent Articles by Supply Chain Quarterly Staff

    Cargo theft and fraud rose 41% in the first 20 weeks of 2023 over last year, CargoNet warns

    Gartner: Top supply chains of ’23 balance risk control, new growth channels

    OSHA, industrial safety experts to headline National Forklift Safety Day 2023

    You must login or register in order to post a comment.

    Report Abusive Comment

    Most Popular Articles

    • Report: Sagging freight stats show that trucking sector is returning to its historic mean

    • Survey: parcel delivery drivers are frustrated by using their own smartphones for work

    • Heavy transport across two continents

    • Survey: most Americans unaware that truckers face shortage of parking spaces

    • Supply chain executives not yet seeing expected results from technology investments

    Featured Video

    20221107korber large vs

    Enhancing Customer Experience with Your Supply Chain Strategy

    Viewer Contributed
    With the rise of e-commerce, many businesses have had to transform their warehouses to handle online orders in addition to regularly scheduled inventory shipments. This means warehouses need more information than ever before to ensure they can meet customers' needs. As a result, companies need to select warehouse...

    FEATURED WHITE PAPERS

    • Three layers of forklift safety: Promoting operating best practices

    • The Complete Guide to Automated Packaging

    • Five tips for parcel success in 2023

    • Guide to Pallet Rack Safety

    View More

    Subscribe to Supply Chain Quarterly

    Get Your Subscription
    • SUBSCRIBE
    • E-NEWSLETTERS
    • ADVERTISING
    • CUSTOMER CARE
    • CONTACT
    • ABOUT
    • STAFF
    • PRIVACY POLICY

    Copyright ©2023. All Rights ReservedDesign, CMS, Hosting & Web Development :: ePublishing