We continue to see transformative changes in the transportation industry. For instance, the less-than-truckload (LTL) market is trending more toward a pricing structure based on the actual cost to move freight, leading to a focus on profitability versus market share. Multiple LTL carriers have already released average general rate increases (GRIs) that have already been implemented or are expected in early 2025 on non-contract business. These GRIs have set the expectation that we will see higher rates across the LTL industry in the new year.
What is Driving LTL Rate Increases?
Carriers must continually adapt their pricing strategies to remain competitive and profitable in the changing landscape of the market. Many LTL carriers are adopting dynamic pricing strategies that adjust rates based on real-time demand, capacity, and market conditions. While these strategic adjustments are trending toward higher base rates, they also enable flexibility that allows carriers to respond quickly to fluctuations in freight volume.
Factors Causing Higher Rates
- Ongoing Investments – There is a growing need for data analytics and ongoing investments in infrastructure, equipment, workforce, real estate, and technology, which affect rates.
- NMFC Freight Classification – The National Motor Freight Classification (NMFC) will be rolling out significant changes starting in January aimed at simplifying the classification process, enhancing the user experience, and increasing the accuracy of freight classification. These changes will impact how shipments are classified in the NMFC system and related shipping costs.
- Insurance Rates – Insurance rates for LTL carriers have been on the rise due to various factors, including the increased frequency and severity of claims, litigation costs, and economic conditions such as inflation, fuel costs, and labor. Carriers are closely monitoring their insurance costs as they can significantly affect overall operational expenses and profitability.
- Accessorials and Fees – Costs are impacted by much more than just LTL rates. Beyond base rates, it is crucial to look at fuel costs and surcharges, accessorial charges, and the addition of premium-priced services.
Taking a Closer Look at Fees
The market shift toward profitability creates a pricing structure that aligns with the parcel market. The following fees are becoming more standardized in the LTL market, though they tend to vary significantly between carriers.
- Accessorial Charges – Accessorials refer to additional charges that carriers apply for services beyond the standard transportation of freight, such as in-bond services, extended detention waiting to load or unload freight, the need for reweighs, and special handling requirements.
- Fuel Surcharges – Many carriers implement fuel surcharges that fluctuate based on current fuel prices, making pricing more variable and dependent on external factors that impact the overall cost of shipping.
- Premium Services – Additional fees are charged in the case of premium service offerings required to meet specific shipping needs, such as expedited shipping, remote delivery, storage fees, and the handling of hazmat materials.
- Length-based surcharges – Shipments that exceed certain length thresholds are frequently subject to additional fees for the extra space and handling needed. Shippers are encouraged to consider packaging options that produce stackable, palletized freight for better trailer utilization.
Shippers must understand and factor these charges into their budgeting and pricing strategies. Clear communication with carriers about expected fees can help avoid surprises and ensure accurate shipping cost estimates. As carriers shift toward a pricing structure based on profitability, the market will be led to higher prices while creating a greater level of transparent pricing. This transparency provides an incentive to optimize freight handling needs and reduce overall costs. In turn, carriers are also being more selective about choosing freight that aligns with their operational priorities.
Contact the ProTrans team today if you have any questions on the trending changes within the LTL market or would like insight into how you can help optimize your transportation needs. Intermodal solutions are also on the rise, taking advantage of the benefits of a mode in each leg of a shipping journey as a means to optimize supply chains.
