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Nov.14, 2016

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10 THE JOURNAL OF COMMERCE www.joc.com NOVEMBER 14.2016 COVER STORY THE US ECONOMY may be expanding at a faster pace, if the latest quarterly economic data prove true, but that acceleration has yet to spur much, if any, increase in freight rates. Shippers moving freight throughout the US are enjoying the kind of pricing power they usually only hold during recessions, thanks to a thick layer of excess truck capac- ity and overstocked inventories, combined with lower fuel costs and fuel surcharges. The strong dollar and skittish consumer demand, at least for items bigger than pack- ages, also play a role. Shippers used that pricing power to hammer down truckload and domes- tic intermodal pricing in 2016, with truck- load linehaul rates falling year-over-year for seven straight months as of Septem- ber. In many cases, logistics managers say, chief financial or procurement officers left them no choice but to press for deep cost cuts, even if that meant sacrificing some services. Tr uckload ca rriers, in pa r ticula r, came out of the first three quarters of 2016 feeling hammered and commod - itized. And, although their fuel costs were lower, the loss of surcharge revenue and tumbling pricing sometimes exceeded fuel savings, thinning margins already only pennies-on-the-dollar thick and damp- ening reinvestment in their businesses. An ad-hoc survey on truckload pricing at the American Trucking Associations Management Conference in early October showed truckload rates ranged from flat to down 10 percent from a year earlier, Stifel Managing Director John G. Larkin said in an Oct. 13 note to investors. Domestic intermodal operators, strug- gling to stem the f low of freight back to the highway and to fill trains, were forced to keep rates low, even as weaker freight demand eased rail congestion and service problems. Railroads are trying to keep a firm floor on intermodal pricing, putting more pressure on the margins of intermo- dal marketing companies also squeezed by shippers. Third-party logistics operators also are feeling the heat from per-mile rates. The drop in truckload prices pulled down C.H. Robinson Worldwide's net income 7.5 percent year-over-year to $129 mil - lion. Quarterly truckload net revenue dropped 10.4 percent from a year earlier, to $309 million, on a 5.5 percent average decline in truckload rates. "We expected a challeng- ing pricing environment in 2016 as shippers focus on reducing their transportation costs," With the economy showing signs of strength and inventories declining, trucking and rail shippers may be in for a mild dose of sticker shock in 2017 By William B. Cassidy and Reynolds Hutchins Source: Company reports C.H. ROBINSON WORLDWIDE TRENDS -8% -4% 0% 4% 8% 12% 3Q 2Q 1Q 2016 4Q 3Q 2Q 1Q 2015 4Q 3Q 2Q 1Q 2014 4Q 3Q 2Q 1Q 2013 ● Rates ● North America Truckload Volume

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