LTL carriers have been posting impressive pricing results so far in 2024.
This has been evident in the Rev/cwt excluding fuel surcharge revenue - in the first quarter alone, Knight-Swift and Saia reported double-digit increases of 13.3% and 10.5% respectively.
XPO followed closely with a 9.8% increase, and Old Dominion posted a 6.7% increase. These are consistent with prior quarters, particularly since Yellow’s closure in August 2023, which has triggered a wave of price hikes among the remaining carriers.
This trend has also been reflected in different reported price increases - Saia secured average increases of 9.2% in Q1 2024. XPO noted an 8.0% increase in contract renewals, and ABF reported a more modest 5.3%.
Most of these carriers have been reporting high single-digit contract renewals over the past year and expect that this trend will continue.
Examining the Evidence
Producer Price Index (PPI) data shows that LTL prices are not only outpacing the overall economy; they’re outpacing other segments within the Supply Chain Industry as well.
The graphs below highlight PPI changes on an overall basis within Transportation and Warehousing, FTL, and LTL.
- PPI by Commodity: All Commodities
- PPI by Industry: Transportation & Warehousing
- PPI by Industry: FTL
- PPI by Industry: LTL
While these graphs appear similar (with significant changes post-COVID), the real story reveals itself when you compute the differences in each index.
The table below demonstrates the relative index values from January 2014 to April 2024 for each segment. The price change in LTL is more than double the overall total and roughly triple the change seen in FTL, which spiked after COVID but began declining significantly in 2022.
Historically, FTL and LTL pricing tracked closely, with LTL typically lagging - but since 2015, LTL has shown robust growth while Truckload hasn’t.
This change coincides with the widespread deployment of dimensioners by LTL carriers, allowing them to better charge customers based on the space their freight occupies and understand their freight volumes more accurately.
Is this LTL Pricing Trajectory sustainable?
The question becomes: Are LTL prices becoming so high that customers are starting to consider alternatives?
There seems to be this significant divide in the LTL market today between what carriers are offering VS what shippers are requesting.
Yellow was known as a low-cost provider - and its closure has left a gap.
The remaining carriers seem focused on offering premium service at premium prices - many are publicly aiming to improve their margins and reduce their ORs annually.
While cost reduction is a strategy, it is challenging in these inflationary times; which makes price increases another viable method.
Large LTL carriers are also investing heavily—hundreds of millions, even billions of dollars—into their networks. These investments need to be recouped, often through higher prices.
As these carriers pursue a premium service model requiring higher prices, they run that risk: higher LTL prices may drive shippers to find other options.
Consider these points:
- Walmart has added a third facility to consolidate LTL shipments and move them via Truckload to regional distribution centers, leveraging lower TL rates
- Saia and Old Dominion noted in their Q1 2024 Analyst Conference Calls that some customers are shifting more freight to TL carriers who are more willing to handle consolidations, multi-stops, and large LTL loads (i.e., small TL loads)
- Technology allows even modest-sized shippers to consider alternatives
- Amazon is likely aware of this situation - and could easily disrupt the market by using its network and outsourced transportation to build a scalable, asset-light LTL network
The freight market is currently soft, but is this softness partly due to the high prices charged by LTL carriers?
Share your thoughts with me in the comments and #LetsTalkLogistics on LTL Pricing!