In the bulk shipping market today, freight demand exceeds capacity. As a result, bulk shipping rates are on the rise, and that trend is likely to continue – at least for the near term.
Those of us who’ve been managing bulk freight for decades know that, like the stock market, freight demand/supply ratios are cyclical. Factors such as increased regulations, driver shortages and effects from weather events have contributed to the capacity issues. Regardless of the reasons, it doesn’t minimize the frustration of a shipper who urgently needs to move a tanker load and can’t find a truck.
Some shippers are altering their strategies in light of current capacity issues. For instance, lanes that were once shopped out are being given to specific carriers as part of a long-term dedicated contract. This further shrinks capacity that might otherwise have been available to the wider market.
And we’re seeing some new behavior. Here’s an example. A carrier that runs regularly from Pittsburgh to Chicago would always make that truck available for Chicago freight bound for Pennsylvania, Ohio or West Virginia. This helped drive profitable revenue for the carrier during the return trip to Pittsburgh. Today, the shipper is paying this carrier to drive home empty because the company wants the equipment back as soon as possible.
Yes, the industry is changing.
How can bulk shippers afford such strategies? Well, for some who are the only source of supply for a particular chemical, they absorb higher bulk shipping rates and pass these on to customers, who don’t have the option of choosing another supplier.
What to Do About Higher Bulk Shipping Rates
While some shippers can afford to pass on higher freight costs to customers, most want to access available capacity at the lowest rate possible. To do so, shippers may need to take one or more of the following steps:
- Be more flexible with pick-up and delivery times. The more flexible you are, the more likely a carrier can fit you into an already tight schedule.
- Add storage capacity. A JIT strategy is hard to make work in today’s bulk shipping environment. Having a storage tank or a supply of totes in the yard would allow more flexibility on load/unload times and open up more capacity.
- Be more carrier friendly. In a seller’s market, carriers can be more discriminating about the freight they hall, prioritizing locations that provide clean break/bathroom facilities for drivers and get those drivers in and out quickly. Quick story: Recently, a chemical manufacturer unexpectedly paused its production line for maintenance and two trucks sat idle for 8 hours waiting to be unloaded. Drivers were understandably unhappy and subsequent delivery commitments were jeopardized. The shipper paid the carrier for the wait time, but the inconvenience factor may lead the carrier to avoid this location in future for fear it might happen again.
- Pay more. Not more than other shippers, just a price that is commensurate with what others are paying. Some shippers have not adapted to the current freight environment. For instance, we still get shippers asking us to lock in pricing and fuel surcharges for three years. This type of negotiating will always be part of the business of moving freight, but shippers, carriers and brokers need to be realistic.
Going Forward: How Can Freight Brokers Help?
In a tight capacity market with higher bulk shipping rates, freight brokers can play an important role – particularly if you are not staffed to be on the phone for hours at a time hunting down carriers.
Brokers can’t manufacture capacity that isn’t there. But, based on their carrier relationships and their knowledge of those carriers’ lanes, brokers like Bulk Connection, who specialize in liquid and dry bulk shipments, can more quickly and easily match your freight with available capacity.
