After freight rates increasing exponentially in 2018, this year seems to not be any different. Freight shipping is incredibly important for many industries and the increase in these rates is likely to affect many businesses. So why exactly have these rates increased? And will they rise again in 2019?
Why do rates change?
Well, there are a few factors that determine the prices of freight. The more obvious answers are that it depends on whether the economic demands grow, which seems to be more likely every year. Also, the capacity and whether that increases. If these things do increase, it may not be the end of the world but it’s the rate at which they grow which needs to be monitored.
If demand growth significantly exceeds the rate that the capacity expands, then rates can rise. By the same token, if capacity expands while demand decreases, it can mean that rate increases are much lower and may even decrease.
What happened in last year?
In 2018, a significant amount of capacity had to be added into the trucking industry to keep up with the increasing demands of the market. At the start of the year, the demand for these goods was increasing incredibly fast, so much so that they could not be kept up with in terms of capacity. However, the demand rate slowed down towards the end of the year meaning that despite there being a dramatic demand increase, the problem was able to be muted as much as possible.
What is happening now?
The problem that still exists is that there are many more loads than there are trucks and truckers to drive them, especially with the recent HGV driver shortage. New analysis tools have significantly improved the accuracy in which these rates can be determined so it is hard to imagine that 2019 will see an increase like last year.
However, driver shortage still remains a problem. The market needs more drivers. It is unlikely that demand will decrease in the near future. With technology advancing and new businesses thriving, we’ll be lucky if we are able to keep rates from increasing under 5% each year. For information on the HGV driver shortage, check out this infographic from Return Loads.