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Cowen survey: Carriers saw almost 5% increase in rates during Q3

Increase in 4th quarter expected to be even higher

Carriers surveyed by Cowen & Co. pulled in contract rate increases averaging 4.9% in the final weeks of the third quarter, according to a report released by the Wall Street firm.

According to the carrier survey that Cowen conducts each quarter, and which was released in mid-October, the 4.9% average increase was up from the 4.5% in the company’s second-quarter survey. The survey results previously had not been disclosed to the public. 

The increase in the contract rates comes on the back of what carriers told Cowen was an “out-of-control” spot market. That has led the carriers, in their negotiations, to lay it “all on the table when in discussions with shippers, bringing transparency on the cost front to justify the increasing rates,” Cowen said in commentary on its findings. 

And they’re not done, according to the survey. In the next six months, those carriers expect to bring home a 5.1% increase.

“This is roughly in line with what we heard on our recent trucking and logistics happy hour,” the Cowen team, led by Jason Seidl, wrote in the survey. 

Powered by those anticipated rate increases, the carriers surveyed by Cowen said they expected their companies’ revenue to grow on average by 4.2% in the next 12 months. That number is the highest among the latest six surveys Cowen has conducted. During the first months of the pandemic, that number was down to 1.9%, and it hit 4% in the fourth quarter of last year. In the second quarter of this year, it was 3.6%.

The third-quarter survey was the first Cowen has done that addressed the issue of COVID-19 vaccination mandates. Given the industry focus on those mandates, and predictions of a significant loss of drivers as a result of them, the answers did not show an overwhelming sentiment that the mandate would cause a loss of drivers.

The largest answer to the question whether the mandates would have a negative impact on the respondents’ business was yes, with 41%. But 36% said no, and 23% said maybe.

Of those who said yes, 73% said the ability to retain drivers would be impacted, and 60% cited the ability to hire new drivers as a concern. (More than one answer was permissible.) Increased testing costs for the unvaccinated were cited by 32%.

Another number that hit its highest level among the last six quarters was the response to the question of whether a carrier expected to increase driver pay in the next year. Even after all the increases companies have handed out, 86% believe they will need to increase pay further in the next 12 months. In the second and third quarters of last year, that number was just 52%. The figure for the second quarter of this year was 81%.

Average pay increases will be 7%, according to the survey. That’s up from 6.8% one quarter earlier and an increase from 4.7% in the second quarter of last year.

The Cowen survey of carriers was released at approximately the same time that the company announced a partnership with AFS Logistics. The two companies will team up on the Cowen/AFS Freight Index, which they said would build “predictive pricing tools for multiple sectors within the freight industry.”

The index will be published quarterly. The data will include truckload, LTL and parcel rates. 

The baseline for the index is January 2018. In the inaugural release of the data, Cowen/AFS said it expects truckload rates in the fourth quarter will be about 15% more than the year-earlier period. LTL rates are expected to be up 16%, while parcel rates should rise about 9%. 

Among other findings in the Cowen carriers survey:

— Despite the backlog of receiving a new Class 8 vehicle, 60% of the respondents to the survey said they had ordered a new truck in the last 12 months. That was up 4 percentage points from the second quarter. But the total orders as a percentage of existing fleet size were down. Carriers in the third-quarter survey said the number of new trucks on order averaged 7% of their existing fleet size. In the second quarter, it was 9%. In the first quarter, the high-water mark of the last six surveys, it was all the way up to 16%.

— There hasn’t been much change in the share of carriers willing to test out an autonomous vehicle. That number for the last several quarters has been as high as 35% and was down to 31% in the third quarter. But one possible reason could be that more companies actually have tested them. A survey answer to the question about willingness to test autonomous vehicles was not only that a carrier would be open to testing but already had done that testing. That figure was up to 8% in the third quarter, up from the 4-6% range of the previous four surveys.

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John Kingston

John has an almost 40-year career covering commodities, most of the time at S&P Global Platts. He created the Dated Brent benchmark, now the world’s most important crude oil marker. He was Director of Oil, Director of News, the editor in chief of Platts Oilgram News and the “talking head” for Platts on numerous media outlets, including CNBC, Fox Business and Canada’s BNN. He covered metals before joining Platts and then spent a year running Platts’ metals business as well. He was awarded the International Association of Energy Economics Award for Excellence in Written Journalism in 2015. In 2010, he won two Corporate Achievement Awards from McGraw-Hill, an extremely rare accomplishment, one for steering coverage of the BP Deepwater Horizon disaster and the other for the launch of a public affairs television show, Platts Energy Week.