Experts predict weak pricing for the remainder of the 2023 parcel-delivery season. Base rates and accessory charges are expected to grow by 6% to 10% in 2024.
Branden Burt, Director of parcel operations at TransImpact LLC, predicts that low prices will continue for the rest of the year because of the weak freight market. Carriers will raise charges in 2024 due to inflation and their monopoly on B2B and B2C deliveries.
Burt predicts a 5.9%-6.9% increase in tariff rates in 2024 due to inflation.
FedEx Corp. and UPS Inc. raised their prices by an average of 6.9% for 2023. FedEx executives have made public statements that most price hikes have been maintained.
Burt stated that shippers would accept similar increases in 2024 despite being in a buyer’s market because the annual general rate hikes are standard and implemented by the carriers. He believes that the market has no choice and has a short memory.
Burt said that strong agreements that include rate caps are the best tool for shippers to combat steep rate increases, but not all shippers have access to them. He stated that FedEx tends to nullify the rate caps on a newly signed rate agreement if it was signed towards the end of the current year, for those who will be negotiating late in 2023.
Burt stated that shippers should prioritize timeliness and expertise to prevent significant rate increases. However, they should also consider accounting for some increase in their plans for the following year.
The rate of increase for parcels should follow the same downward trajectory as all other modes, according to Paul Yaussy, senior consultant, professional services at Shipware LLC. Yaussy said that if the carriers are reading the room properly, a 5.9% increase or lower is expected.
According to Josh Dunham, co-founder, and CEO of The Reveel Group, increases in surcharges and fees added to line-haul charges are important factors that are often not included in announcements. The Reveel Group provides multi-carrier rates and accessorial platforms for comparing parcel provider services. He said that he expects to see an average of 9-10% increase realized by shippers when they run the model over their data set for the ’24 increase.
UPS and FedEx are facing challenges due to a global recession, which has resulted in flat or negative volume growth. As a result, they have had to rationalize asset utilization. Burt mentioned this. He said that there are some who believe that UPS will try to engage in a volume grab similar to what FedEx did during Q1 once it reaches an agreement with the Teamsters.
UPS and the Teamsters Union had positive discussions. FedEx signed a preliminary contract with its pilot union. There will be no interruptions in service from any carrier at this time. The Teamsters and UPS have agreed to make packages submitted under UPS’ Surepost service smaller. The agreement is preliminary. The packages will be sent to the United States Postal Service. The arrangement will shift packages to UPS vehicles. The vehicles are driven by union employees. The cost to the company will be higher. Surepost consolidates low-value parcels and delivers them to your home.
Yaussy said that if there are higher costs from a Teamsters contract, UPS may have to raise rates higher than normal to offset the increases. He added that FedEx would follow suit.
A hefty rate hike in 2024 will benefit the logistics sector. The logistics industry’s profit margins are under pressure. Gasoline, labor, and other factors are causing this. Price increases will help alleviate some of the pressure. It can boost businesses’ financial health. Price increases may lead to shippers working with fewer carriers. This can streamline logistical operations and reduce expenses. For more such news on the logistics industry, follow Lading Logistics.