LTL Pricing Discipline: A Fragile Facade?

As the less-than-truckload (LTL) industry navigates the post-pandemic landscape, one question looms large: can carriers maintain their pricing discipline? A recent report from 3PL AFS Logistics and financial services firm TD Cowen suggests that the answer may be a resounding "no." Let's dive into the data and explore the factors that could lead to a breakdown in LTL pricing discipline.



The report indicates that LTL pricing has been resilient, with carriers pricing freight closely tied to the true cost to move it. However, as demand remains tepid and carriers seek out "attractive" freight, opportunities for shippers to negotiate better rates may arise. This raises concerns about the sustainability of current pricing levels.

One factor contributing to the potential breakdown of LTL pricing discipline is the closure of Yellow Corp., the nation's third-largest LTL carrier. With Yellow out of the picture, the competitive landscape may shift, potentially driving prices down as shippers explore other options. Additionally, FedEx's planned spinoff of its LTL business could further shake up the market, as shippers may entertain new possibilities.

Another concern is the redeployment of terminals acquired from Yellow's estate. As carriers eye the remaining 100 sites up for auction, competition could intensify, potentially leading to lower prices. Moreover, the redeployment of these terminals could result in increased capacity, further pressuring pricing discipline.



The report also highlights the importance of volume in maintaining LTL pricing momentum. With no major carrier on the brink of closure and the industrial economy in its third year of a downturn, the LTL industry will likely need a more meaningful demand catalyst to continue pushing rates higher. This dependence on demand underscores the fragility of LTL pricing discipline.

In conclusion, while LTL carriers have demonstrated remarkable pricing discipline in recent years, the factors outlined in the report from AFS Logistics and TD Cowen suggest that this resilience may be short-lived. As demand ebbs and flows, and the competitive landscape evolves, shippers should remain vigilant and prepared to adapt to changing market conditions. The LTL industry's pricing discipline may prove to be a fragile facade, and those who fail to anticipate and react to these shifts may find themselves at a disadvantage.

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