SPECIAL REPORT: Rail strike means higher truck rates, more freight

By David Tanner, Land Line associate editor | 11/30/2011

Wednesday, Nov. 30, 2011 – Truckers stand to pick up more freight, with higher rates, in the next week or so as shippers brace for a possible strike in the freight-rail industry. Strike action by railroad unions could happen Dec. 6, and shippers are already taking precautions by diverting freight to long-haul trucks.

One industry analyst says that certain segments in trucking could capitalize on the situation, including expediters, owner-operators and fleets that specialize in team driving.

“What I would do if I were an owner-operator out there is I would be reluctant to accept anything other than a premium rate for the next week or until there’s a resolution,” says Donald Broughton, managing director and senior research analyst for Avondale Partners.

“Just understand whether you’re being offered freight from a shipper directly or from a broker that the environment is such that you can demand upwards of 50-plus percent, or maybe even more, higher rate than you might normally be able to,” Broughton told “Land Line Now” on Sirius XM on Wednesday, Nov. 30.

“That would be especially true if you were in a situation where you had a team-driven truck.”

Broughton said shippers are likely to begin diverting freight to trucks on Thursday in anticipation of the Dec. 6 strike deadline. He said the last thing shippers want is to have freight stuck on the rails during the busy retail season.

“What’s happening is, until there’s a settlement, shippers are going to begin today, tomorrow and into the weekend diverting freight from intermodal to over-the-road simply because they can’t afford to get their freight, especially during holiday shipping season, stuck on the rail in the event of the strike,” he said.

Negotiations between 13 of the major railroad unions and management led to resolutions in 10 cases, thanks in part to recommendations by a federal panel charged with helping the two sides get together.

The holdouts, which include the Brotherhood of Locomotive Engineers and Trainmen, could call for a strike or face a lockout by the railroads if an agreement is not reached by the deadline.

Union officials say time is running out on a voluntary resolution and that they will not accept temporary solutions.

According to the shippers, a freight-rail strike would cost the economy $2 billion per day.

Truckers have already been benefiting from tight capacity this year, Broughton says, but the strike stands to put more owner-ops and teams in the catbird seat. Those who can keep their trucks moving will be in the best position, he said.

“Obviously, spot rates are going to go up dramatically,” Broughton said. “I’ve heard stories of shippers paying for deadhead for hundreds of miles to get trucks where they need them to service freight, and we’re going to see strong pricing out there in the spot market, at least until there is a resolution, on top of the strength we’re already seeing.”

Leaders in the U.S. House of Representatives say they’ll use legislation to prevent a strike from happening if necessary.

“While our hope is that the parties involved will find common ground and resolve the situation without congressional involvement, the House is prepared to take legislative action in the days ahead to avert a job-destroying shutdown of our nation’s railroads, in the event such legislation proves necessary,” House leaders John Boehner, R-OH, Eric Cantor, R-VA, and Kevin McCarthy, R-CA, said in a joint statement on Tuesday.

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