FedEx Corp. said Thursday it will raise its less-than-truckload (LTL) rates by 6.9 percent, effective Nov. 1, following in the footsteps of rival ABF Freight System, which is planning a 5.9-percent increase of its own.
In addition, the Memphis-based transportation and logistics giant will hike its air express rates by 5.9 percent, although the increase will be offset by a two percentage point reduction in the carrier's fuel surcharge. That increase takes effect Jan. 3.
Increases for FedEx's ground parcel service and its SmartPost product, which it offers in conjunction with the U.S. Postal Service, will be announced later in the year, FedEx said.
The rate increases for FedEx's regional and national units—whose operations are scheduled to be combined in January—follow ABF's announcement of its own rate hikes, which take effect Oct 1.
The LTL market continues to struggle with sluggish demand and cutthroat pricing, and it would surprise no one if large-scale shippers are able to significantly beat down the carriers' general rate increases. Still, with fewer drivers on the road and with new federal safety regulations set to take effect later this year that may disqualify as many as 7 percent of drivers, carriers may feel shippers would be willing to pay higher rates to sign longer-term contracts with guaranteed space.
John Smith, chairman of CRST International, a large privately held truckload carrier in Cedar Rapids, Iowa, said his company recently inked a three-year contract with one of its larger customers, the first time the company has ever signed such a long-term deal with that shipper. Smith spoke Wednesday at the Council of Supply Chain Management Professionals' annual meeting in San Diego.
Smith added that demand and capacity are pretty much aligned at this time and that there is no new supply hitting the highways. "People are just now getting back to a replacement cycle" in terms of rig orders, Smith said. "No one is adding capacity."
Gartner, Inc.