In total, shippers expect transport budgets to rise sharply over the next 12 month, with average cost increases including fuel coming out at 6.5% for the year. That reflects both expectations for higher shipping costs and a little over 3% on average rise in freight volumes. That's up from expectations for a 4.3% increase in total spend from the previous quarter, as oil prices continued to rise during Q4 from earlier in 2010.

Shippers also see the demand-supply balance moving more in the carriers' favor in several transportation modes. Shippers predict the highest rate increases over the next 12 months in intermodal, followed by ocean shipping, truckload carriage, and rail. (See figure below.) The report says intermodal rates fell by some 30% in Q4 2010, however, after rising in the first half of last year.

Views on truckload capacity where somewhat mixed, but there is clearly concern about the future. 30% of respondents saw TL capacity as being "tight" in Q4, but that's down from the 70% of shippers who felt that way in Q2 of 2010. The number of TL shippers who saw the environment as "balanced" increased from 38% in Q3 to 47% in Q4.

Despite the recent improvements, however, a strong 77% of respondents expect to see very tight or somewhat tight truckload capacities over the coming year. Wolfe Trahan says this is the highest number seen on this measure since mid-2004, and notes that was followed by a multi-year pricing upswing for the carriers and a mini-"capacity crisis" in 2005-06.

All told, shippers expect truckload rate increases before fuel surcharges to average 3.1% over the next 12  months.

On the LTL side, the vast majority see the market right now as "balanced"; with only 6% perceiving tight LTL capacity. 

Wolfe Trahan believes some of the concern about TL capacity stems from what shippers perceive as the potential impact of new government regulations, specifically CSA 2010 and proposed new changes to current Hours of Service rules. The report found an amazing 92% of shippers were opposed to changing the current maximum driving time of 11 hours down to 10, as the Federal Motor Carrier Safety Administration is considering right now. (See Schneider National Exec Tells FMSCA that New Hours of Service Rules will Drop Productivity 5%, have no Impact on Safety.)

 As a result of the combined impact of tighter truckload capacities and higher rates, shippers expect a rather significant increase in the percent of their freight volumes that will go intermodal. 38% of shippers are looking to move more freight via intermodal versus pure truck carriage, up from 30% in Q3. Another 16% said they had already moved freight from truck to intermodal over the past year. About 36%, however, said they would not move any freight away from trucking because intermodal carriage did not meet their business or transport needs.

In Q4, there was a net diversion of freight volumes from truck to rail/intermodal of 1.7%, a significant change, actually, up a full point from the .7% move to rail/intermodal in Q3 and the largest shift from truck to rail since mid-2008 - another period obviously of rising fuel prices.

The chart below shows the tight correlation between changes in oil/fuel prices and plans to divert freight shipped from truck to rail/intermodal.

Other highlights of the report include:

• 13% of shippers have already fully integrated CSA 2010 BASIC safety rankings into their carrier selection process, and another 72% say they will do so in the future, leaving just 15% in total who did not indicate they planned to do so. Additionally, 66% of shippers said they had entered into discussions with current carriers which were flagged with alerts from the safety reporting system.

• 38% of shippers say they have seen parcel shipment costs rise as a result of the new approaches to dimensional weighing (DIM) taken by UPS and FedEx at the beginning of the year, including 11% saying the result was at least  a 5% increase in parcel shipping costs. 26% of respondents, however, say they have been able to negotiate no changes to those formulas.

•  Shippers see ocean freight rates decelerating. On average, respondents expect ocean rates to increase 2.7% this year, down from expectations for a 3.9% increase in rates last quarter. Wolfe Trahan says spot rates have declined of late 27% from their 2010 peaks.

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