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Freight Rates in 2023 – Trending Higher or Lower?

LTL Freight Trucks

Since I started my wholesale company in 1986, freight rates have never been so high or more volatile than they are right now.

In this article, I’m going to give you MY perspective and experience as a buyer of domestic goods, as an importer of full-container shipments, and as an LTL (Less-Than-Truckload) shipper of products we sell at Mazer Wholesale, Inc.

First let’s get a little more specific about LTL trucking. LTL (Less-Than-Truckload) is any freight transportation firm that transports products in a truck in package form, on a pallet, or in a multiple-pallet shipment. UPS, Fedex are LTL, carriers, as well as trucking companies who specialize in delivering multiple shipments in a single load.

LTL Rates Are Still On The Rise in 2023

LTL rates continue to rise for several reasons. The upward pressure on freight costs are related to:

  • The affects of COVID which date back to around March, 2020: The loss off 1000’s of truck drivers who quit, died, or were laid off during the pandemic created a demand for new truck drivers. Demand drives up prices and in this case, truck drivers who remained working and incentives for newcomers to the truck driving business drove wages to new highs.

 

  • The Biden administration’s decision to return to foreign energy: Gasoline and diesel prices plummeted in the Trump administration and skyrockets when we went back to importing oil.

 

  • Inflation: Almost everything in the American economy has risen drastically in price since 2020. Operating costs of very company that produces, distributes, sells, and uses products Americans consume are affected by higher costs. Therefore, all business expenses are higher: employees’ wages, the manufacture of goods, storage, distribution, and transportation, in one form or another are affected by higher costs, and therefore, higher prices. It’s domino effect – Everything affects everything else.

At this time, we are still in an inflationary period so we and other experts (read this article courtesy of Ryder Commerce) expect trucking prices to continue their upward movement.

I predict that LTL prices will never return to pre pandemic rates because wages and other miscellaneous expenses in the transportation business will not fall anywhere near prices in other markets.

Ocean Freight Container Shipment
Ocean freight rates have dropped significantly – almost to pre-pandemic levels.

Good News for Ocean Freight Pricing

There’s a silver lining in this “freight” story. Ocean freight has dropped down to more traditional levels. A 40 foot container shipment from China (Asia) had spiked during the pandemic. Rates peaked in the range of $20,000 for a shipment from Shanghai to New York. That was up almost 10x the regular cost – generally in the range of $1600-$2400.

There’s no doubt the ocean freight carriers took advantage of an opportunity to GOUGE importers. During the ocean rate spike, which lasted more than 2 full years, most importers (large retailers and wholesalers) could not increase THEIR prices congruently with ocean freight costs. Let’s face it…paying $17,000 more for ocean freight adds for than a few pennies to the price of individual products. Companies like ours had to raise prices, but not at all congruently with our new costs. Profit margins took a dive…a deep one.

Now that the importing costs are down to earth, importers have a window of opportunity to keep their prices stable and possibly make up for some of the profit they gave up during those 2 years we ate all those cost increases.

As a wholesaler of nearly 40 years, I have seen big shake-ups in several industries. These events were largely cause by raw material shortages in one industry or another. The COVID-19 pandemic was obviously the biggest worldwide interruption in a lifetime, but it was a major learning lesson on many levels.

The Blunt and Honest Ending

The fact that ocean freight companies took advantage of an opportunity pales in comparison with what world governments (including the USA), did to illegally, forcefully, and lawlessly take away people’s rights and freedom.

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