Dive Brief:

• C.H. Robinson worked to reprice contracts in its truckload business in Q4 2020 "to reflect the rising cost environment," CEO Bob Biesterfeld said on the company's earnings call Wednesday.
• Overall truckload volume fell 3.5% YoY in Q4, but costs rose 32.5% YoY, leading C.H. Robinson to push up pricing 29% YoY in the quarter.
• "Q4 represented the highest average rates that we've seen on record over the past decade," Biesterfeld said. "Additionally, the year-over-year change in rate and the change in cost were the highest rate of change that we've seen in both metrics over the past decade as well."

Dive Insight:

C.H. Robinson's earnings call highlights how a historically tight trucking market in Q4 triggered surging rates, as demand to move freight outstripped the available capacity.

"We're expecting that space will remain tight and demand will remain strong with the vaccine rollout and with all the supporting products PPE, etc., along with continued low inventory levels," Biesterfeld said. "So, available capacity is likely to continue to be an issue until such a point that passenger flights really start coming back to more normal levels on international air travel."

Market dynamics pushed the transportation provider to purchase more loads from the spot market, with its Q4 mix ending up at 55% contractual and 45% spot volume, compared to a 70% contractual and 30% spot mix during Q4 2019.

This has already started to shift, Biesterfeld said.

"As more freight moves out of the spot market and in the contracts, we would expect to see some moderation in cost [per mile] relative to what we saw in the fourth quarter," he said. "So, if we look within the fourth quarter, we did see this start to play out and that trend is now carrying into January."

The increased reliance on the spot market hiked C.H. Robinson's costs, which it is working to pass along to its customers. The price for its customers will continue "gravitating higher throughout the course of the year," but likely not at as high a rate as in Q4, Biesterfeld said.

C.H. Robinson is not alone with working to pass costs along to its customers. J.B. Hunt executives spoke about taking similar steps this month.

"Costs on all fronts, dray, rail and productivity, have all come at us at a fast pace in 2020, and this New Year presents our opportunity to price those costs into our business," J.B. Hunt President of Intermodal Darren Field said on the company's earnings call.

As shippers look to mitigate these costs from transportation providers, many of them might focus on shipper of choice fundamentals, such as reducing dwell time and having consistent tendering behavior in an attempt to avoid putting loads on the spot market, Michael Zimmerman, partner and lead for analytics in the Americas at Kearney, said this month.