This commentary appeared in the print edition of the Jan. 6, 2020, Journal of Commerce Annual Review and Outlook.
Looking at contract and spot pricing, let’s focus on the increasing operational costs of trucking so we can understand what will drive (no pun intended) the spot and contract markets in 2020. I serve on the American Transportation Research Institute’s (ATRI) Board of Directors. ATRI recently released its annual update to the Operational Costs of Trucking report. And here’s a spoiler alert for those of you who read this entire column: Trucking costs are up 7.7 percent overall on the average cost per mile incurred by motor carriers.
In the most recent report, trucking industry costs continue to outpace inflation. To highlight that, let’s look at what is no doubt the most widely publicized cost increase, driver wages and benefits, trucking companies’ number one expense. Driver wages are up 7 percent, while benefits are up 4.7 percent. While freight flows will fluctuate, higher driver wages are here to stay, reinforced by what the American Trucking Associations (ATA) estimates is a shortage of 60,000 qualified drivers.
Another area of cost increase for the trucking industry is insurance premiums. The most recent survey shows a 12 percent increase in trucking insurance premiums. An active plaintiffs’ bar, fueled by some well-publicized industry “nuclear verdicts,” has been noted by the insurance industry. While the ATA has prioritized this issue, higher insurance costs are a reality today.
One of my big concerns for the industry is tolls. ATRI shows an 11 percent increase in tolls for trucking companies. We now have truck-only tolls in Rhode Island, and the Indiana Toll Road singled out trucks with a 35 percent increase. Earlier this year, I had the opportunity to testify before Congress on the industry’s concerns over toll roads. In my testimony, I shared that we support increased funding of our highway infrastructure through a modest increase in the federal fuel tax as part of ATA’s Build America Fund. What we don’t support are the high administrative cost of toll roads and placing an unfair burden on the trucking industry.
It’s a fact that trucking costs are on the increase, whether you are looking at projections for the contract or spot market, but by working closely with our shippers we can partner together to move our nation’s freight as efficiently as possible.