U.S. LTL Market Expected to See Significant Growth

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Those in the industry know the United States Less-Than-Truckload (LTL) market is experiencing major growth. As the economy continues to improve and stimulate growth across multiple manufacturing sectors, in turn, there is an increase in demand for LTL shipments.

According to David Ross, LTL analyst for Stifel (SF), better times lie ahead in LTL thanks to lower taxes, reduced regulations, and increased capital spending. And already we’re seeing a clear picture of this growth, with publicly traded carriers in the $35 billion LTL market reporting a second-quarter increase of 4 percent in reported tonnage over the same period last year.

We take a closer look at the different factors driving this growth.

1. E-Commerce

Online shopping and the subsequent shipping of purchased goods is easily one of the key drivers of growth in the LTL market.

According to the U.S. Department of Commerce, “E-commerce sales in the second quarter of 2017 accounted for 8.9 percent of total sales.” That’s an increase from 7.4 percent in the same period in 2016. The growth of online shopping has paved way for new services from LTL carriers, what with supply chains becoming shorter, faster turn times, and an increased demand for smaller but more frequent shipments.


2. Tech

The rise of integrated services, smarter shipment tracking, and detailed shipment information has encouraged shippers to look for solutions that offer real-time pricing, booking, and tracking features. These technologies have also impacted LTL carriers with capacity on specific lanes.

3. Pricing

With fuel surcharges approaching the highs of 2015, many LTL carriers are shooting for a rate increase of 3 to 5 percent. Although some companies are getting some pushback, the hike rates have not caused them to lose business. But while the current pricing environment is healthy for the most part, Stifel expressed concern over potential capacity issues in the near future.

4. Electronic Logging Devices (ELD)

In December 2015, the Federal Motor Carrier Safety Administration issued the Electronic Logging Device (ELD) rule, a sweeping mandate that requires truckers to install an ELD—a device that lets commercial motor carriers track engine activity and record actual driving time for ease of Hours of Service (HoS) compliance. The deadline to comply is December 18, 2017.

Industry analysts believe that while ELD devices could benefit LTL carriers, it comes at the expense of TL carriers. As TL capacity goes down, pricing and tonnage for LTL carriers are expected to increase.

These factors combine to create a bullish outlook for the U.S. LTL market, with carriers likely to expand and experience modest revenue growth over the next few months.

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