Should you expect your LTL costs to rise?

This year, the Journal of Commerce announced that Less-than-Truckload (LTL) shipping rates will increase by 4.1% on average in 2024, following a 2.4% increase in 2023. This marks more of the increases we’ve been seeing over the past half decade. At the moment, LTL rates per pound are over 50% higher than they were in January 2018. 

If you’re locked into a contract with an LTL provider, this might not seem like a huge deal. However, if you’re paying for non-contracted shipments, looking for a new contract, or facing the end of a contract term, this could potentially represent another inflated cost to your business.  

In this article, we look at the current state of the LTL market, and how your business can make decisions to avoid paying more than it needs on LTL shipments.  

What’s going on with the LTL market? 

As with other areas of freight, rates have been on the rise since 2020. If you have experienced renewals, signed, or even just inquired about LTL contracts, there’s a good chance you’ve already felt the effects of this upward trend.  

With the pandemic in 2020, and the subsequent supply chain disruptions, freight services like LTL were in high demand. Carriers ramped up their capacity, leaving the market in a state of oversupply when demand balanced out again.  

Last summer, the LTL industry was thrown into a bit of turmoil, when freight giant Yellow Corp. exited the market following a bankruptcy filing. This left tens of thousands of workers without a job, and many shipping partners looking for alternative options. The ripple effect of a shutdown like this is often inflated rates and market instability.  

It’s not as bad as predicted. 

Despite the vacuum left by Yellow’s closure, which caused a significant surge in LTL rates, the rate increase predicted is looking better for businesses than previously expected. This is because, by this point, most of Yellow’s former business has been absorbed by other providers, and the LTL industry is facing the additional challenges of “low freight demand, excess capacity, and lower than pre-pandemic productivity.”    

In fact, labor hours are down for LTL workers. According to the Journal of Commerce, “weekly hours worked by LTL non-supervisory employees were down to about 38 hours in late 2023, compared with 43.1 hours in January 2019, according to data from the US Bureau of Labor Statistics (BLS).” 

What does all this mean? Essentially, though you may see an increase in the price of your services, it’ll be less than it could have been, all things considered. And, very likely, with demand down, LTL shipping providers are in a position where they’re going to need to be flexible to hold onto their already dwindling business.  

What should you do if your LTL contract is reaching its term? 

LTL providers are in the position of having to try to raise rates – like by the margins discussed above – to cover the cost of operating with less business. However, given the current market, they’re not in an excellent position to let clients walk if they’re unhappy with those rates.  

Business owners, operators, CFOs, etc. should take the time to review any new contract terms given by their incumbent LTL providers, and not accept rate increases at face value. Even if their provider says that’s the set-in-stone price, there is likely significant room for negotiation.  

Researching alternative options, advocating for your organization, and working with third-party specialists capable of getting you better pricing can ensure that your business doesn’t shoulder the expense of LTL market slowdowns.  

In conclusion… 

Despite rate hikes overall – a trend that has been going on for years – LTL providers aren’t in a great place to demand more money from its clients. Overall, negotiation and persistence will be your friend, especially when it comes time to renew your contract or enter a new one.