2020 Rate Outlook: Continued uncertainty, rising costs

We did our first Logistics Management (LM) Rate Outlook print fea­ture and webcast combination 15 years ago, and over that time it has proven to be the most-read feature and best-attended webcast every year. And the premise has never changed: We kick off the year with a picture of the global economy and fuel cost and then examine how those realities will affect freight rates and capacity levels across each mode of transportation.

We’ve once again surrounded ourselves with some of the leading economic, fuel and freight transportation analysts in the market, allowing each a few minutes at the lectern to offer a quick glimpse into the immediate future in an effort to help shippers prepare their freight transportation budgets for the long run ahead.

So, if you’re looking to fine tune your logistics planning for 2020, there’s a simple two-step process: first, spend some time with our Rate Outlook print featur, and then carve out an hour to join our esteemed panel for our webcast that goes live on Thursday, January 23, at 2:00 p.m. ET. At that time, you’ll be able to submit any questions you have to our speakers and dig deeper into their insight.

This year we asked long-time logistics industry analyst, consultant and frequent LM contributor Brooks Bentz to do the honors of rounding up our panel and drilling into the knowledge base to see what he could find. He says that while this may be one of the most unsettled environments he has ever witnessed, now is simply not the time for shippers to sit on the sidelines with a “wait-and-see” attitude.

“In the more than a dozen conversations I had with experts across all of the modal segments, one common, emergent theme was ‘uncertainty is certain,’” says Bentz. “And everyone’s crystal ball is significantly murkier than usual. The fact remains that with these unstable market conditions with respect to price, capacity and cost, it’s simply not possible to maximize network effectiveness and performance with traditional methods.”

Bentz strongly advises that shippers be bold and take a more proactive approach this year, not just with the application of technology to better track capacity and cost, but by being more flexible with your modal mix.

“Looking at the network holistically and optimizing modal choices is always wise, but never more so than now,” adds Bentz. “With the economy in a confused state and the uncertainty that the new IMO-2020 regu­lations will have on the domestic cost of fuel, getting a good handle on network spend, capacity needs and evaluating modal choices is a very sound step.”

Indeed, the true wild card at this point in time will be the fallout from the implementation of the new IMO- 2020 regulations January 1—the single largest regulatory change ever in the oil space. According to London-based Drewry, fuel costs globally will increase by $11 billion in 2020 due to the IMO regulation, an amount that’s three times the aggregate profits of ocean carriers in 2019.

“What many overlooked is that while the IMO rules don’t specially apply to truckers, they will face new competition from ships for lower sulfur fuel,” adds Bentz. “This is expected to push up the price of diesel fuel for trucks by as much as 100%.”