Dive Brief:
- FedEx's transportation subsidiaries will each increase shipping rates as of Jan. 7, 2019, according to a press release.
- Express, Ground and Home Delivery rates will rise by an average of 4.9%. FedEx Freight rates, meanwhile, will increase by an average of 5.9%.
- The carrier is also increasing most of its surcharges. The express freight surcharge will increase from $140 to $175 per freight handling unit, while additional handling surcharges for packages (by dimension) will rise from $12 to $13.50 in 2019 — to name a few examples.
Dive Insight:
It's not unusual to see carriers raising rates on an annual basis, but a confluence of factors has shippers bracing for above-average rate increases in 2019.
A strong economy, a labor shortage, higher interest rates, high fuel costs and a new tax law encouraging capital expenditures are some of the macro-level indicators leading to higher costs for carriers. Such costs are likely to be passed on to shippers, Dean Macumbia, partner at Last Mile Experts, said on LinkedIn.
But it's the micro-level factors that will hammer shippers this year.
UPS and the Teamsters, for example, renegotiated their master contract this year to include higher pay rates for drivers and some shifts to its transportation strategy. At the same time, FedEx missed its Q1 earnings estimates, which Macumbia said adds Wall Street pressure to recover revenue by increasing rates further.
The United States Postal Service is also planning a rate increase in 2019 — one that could cost companies Amazon up to $1 billion, according to some estimates — reflecting the price pressures shippers face to date.
