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JOC | Harvey Adds a Tailwind to US Truck Price Hikes

09.01.17 | William B. Cassidy, JOC

As Hurricane Harvey recedes, truck rates will only rise, not just in Texas but nationwide, thanks to the Gulf Coast storm. The question is, by how much?

Perhaps in the high single digits, an industry pricing expert said.  “It will be somewhere in the 8 to 10 percent range, but we’re just a few days into it,” Mark Montague, industry pricing analyst with load board operator DAT Solutions, said Tuesday. Data needed to make an accurate forecast isn’t available yet, but there’s no question truck pricing and transportation costs will surge.

“Locally, truck rates are going to double,” Montague said, as Houston shifts from distributing immediate relief supplies to flood victims to long-term recovery and rebuilding of infrastructure.

The recovery from Hurricane Harvey will consume truck capacity that would normally be used elsewhere, exacerbating trends that are already tightening US truck capacity as freight demand rises. Consulting firm FTR estimates Harvey will strongly affect 7 percent of US trucking, taking some portion of that percentage out of operation for the next two weeks.

Securing truck capacity will be an immediate, tactical problem for shippers, but “the big deal is the supply chain,” Truckstop.com chief economist Noel Perry said. “Supply chains are going to be messed up” not just for days but weeks and perhaps months as shippers and their transportation partners work around inefficiencies created by the disruption of Hurricane Harvey.

“I expect that disruption to last for at least two months,” Perry said. “The big effect is not a shortage caused by an event, but the fact that the trucks are moving in goofy ways that lowers their effective mileage per day. The effect is a decrease in supply-chain productivity.” Trucks and trailing equipment far beyond Houston and Texas will be out of position thanks to Harvey.

Nationwide, based on spot market history after past storms, including Hurricane Katrina, Hurricane Sandy and the 2014 winter storms, “my guess is we’re looking at a 5 percent hit for three or four months” in truck pricing, Perry said. “Maybe 2 or 3 percent on the contract side and 10 percent on the spot market.” That’s in addition to other factors affecting price inflation.

The Gulf Coast disaster from Corpus Christi, Texas to Louisiana invites comparisons with Hurricane Katrina and the flooding of New Orleans in 2005. US shippers paid on average up to 7 extra percentage points of annualized spot market truck pricing for five months following that storm, FTR said Monday. However, Harvey is not Katrina, and Houston is not New Orleans.

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