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Shippers to pay more for cargo in 2021, freight broker says

SHIPPERS will probably pay more for freight heading into 2021 after the pandemic lockdown drove many small truckers out of business and cargo demand rebounds faster than the economy, said the chief executive officer of freight broker CH Robinson Worldwide Inc.

Demand for cargo shipping plunged in March when schools and offices closed to curb the spread of Covid-19, sending many drivers to seek jobs in the construction industry, said Bob Biesterfeld, CEO of CH Robinson.

The company has almost US$20 billion of freight under management and contracts with 78,000 trucking companies.

The driver exodus has reduced truck capacity just as retailers begin restocking and freight demand snaps back, he said.

Meanwhile, air-freight capacity remains constrained.

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"There's going to be demand coming online that I believe will continue to drive market tightness and pricing inflation," he said.

On top of that, at some point there will be the need for distribution of a vaccine "like we've never seen before, and that will clearly create some logistics bottlenecks as well".

Stocks of trucking companies and freight brokers have soared since May as cargo rebounded from lows.

The American Trucking Associations said in August that for-hire long-haul fleets have 3 per cent fewer trucks this summer than a year earlier.

Through July, trucking freight tonnage is down 3.2 per cent this year, the trade group said. Spot rates have soared 19 per cent from a year earlier, according to a Truckstop.com market report.

CH Robinson's profit has been squeezed as the broker pays more now for transportation for its customers, whose rates are locked in with annual contracts.

New digital freight brokers, including Uber Freight and Convoy, have also put pressure on profits as the startups use price to lure customers, forcing legacy brokers to spend more to beef up their digital operations to compete.

As part of a five-year plan to spend US$1 billion on technology, CH Robinson on Tuesday rolled out a service that allows shippers to match their transportations needs across routes the broker serves, instead of relying on annual bids for business.

CH Robinson also recently partnered with Microsoft Corp to make its digital freight quotes compatible with programs that companies already use for planning.

"The progressive incumbents and the digital upstarts, I don't think those companies are going to look too different two years, three years out in the future," Mr Biesterfeld said. "Then the differentiator becomes really about scale, the data advantage and the integrated services we offer on a global basis," he added. BLOOMBERG

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