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Carrier rates of return improve; credit remains tight

Transport Capital Partners’ fourth-quarter 2013 industry survey sees more carriers getting adequate rates of return, but tight credit and static accessorials as continuing issues of concern.

With a continued lack of rate increases in the trucking industry, some carriers may have hoped to raise income through renegotiating accessorials. Unfortunately, 42% of carriers surveyed in the fourth quarter indicated they do not expect to be able to renegotiate. This is down slightly from the past two quarters.

Over the last two years, the number of carriers able to raise fuel surcharges has dropped from 30% to 11%. Pessimism about accessorials is greater among smaller carriers than the larger carriers (50% versus 38%).

Carriers are more positive when it comes to renegotiating detention times. Forty-three percent now expect to renegotiate. While renegotiating detention times does not necessarily raise cash, it can make equipment more productive.

Approximately 30% of larger carriers think they will be able to renegotiate miles paid (ie, move from shortest route to practical route). This change--were it to materialize--would have a significant impact on revenues, even with stagnant rates.

Despite the lack of rate increases and static accessorials, slightly more than half (54%) of carriers indicated they are getting an adequate rate of return--the highest level yet for this survey.

“For the industry to thrive, and not just survive, a large percentage of carriers must be making adequate rates of return to afford the investment in equipment and support services required by modern supply chains,” says Richard Mikes, TCP partner. While positive, the numbers are not entirely encouraging. Forty-three percent of carriers still believe they are not getting an adequate return. The issue may lie in how carriers define “an adequate rate of return”. What is “adequate” for one carrier may be “inadequate” for another.

Carriers are also not seeing improvement in credit availability. Approximately 75% expect credit availability to remain the same--a similar number to one year ago. It appears carriers believe tighter requirements for credit is the new normal.

“Credit availability and carrier profitability go hand–in-hand, both are essential to replace aging fleet assets and to grow capacity. Carriers with stronger profitability and cash flows will find credit available and affordable and will be better positioned to gain market share,” says Steven Dutro, TCP partner.

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