
As we move into 2025, the landscape of intermodal shipping in the U.S. is poised for significant changes, particularly with J.B. Hunt Transport Services announcing preparations for higher contract rail rates. At Gain Consulting, we understand the implications of these shifts for shippers and are here to guide you through what this means for your supply chain operations.
Understanding J.B. Hunt's Rate Increase:
J.B. Hunt, the largest intermodal provider in the U.S., has signaled an upcoming adjustment in their rail service rates. Despite reporting a record-breaking volume in the fourth quarter of 2024, with a 5% increase in loads, revenue saw a 2% decline due to lower contract prices from the previous year. This scenario underscores a broader industry trend where volume growth does not necessarily translate to revenue growth due to pricing pressures.
Market Conditions and Rate Expectations:
CEO Shelley Simpson highlighted during the earnings call that J.B. Hunt is emerging from a freight recession with a strong position, thanks to its capacity and service levels. However, the actual increase in rates might not materialize until the third quarter of 2025, given current market conditions. Darren Field, president of J.B. Hunt’s intermodal division, emphasized the company's strategy for transparent pricing discussions, aiming to align rates with the value provided to customers.
Challenges in Securing Rate Increases:
Regional Variances: While some regions like Northern and Southern California have seen modest rate increases, these gains are less than anticipated. Other areas continue to experience flat or declining contract rates.
Pricing Cycles: Brad Delco, VP of Finance and Investor Relations at J.B. Hunt, indicated that the first quarter's pricing is already set, focusing now on influencing rates for Q3 and beyond. This suggests a longer-term strategy rather than immediate changes.
Market Leverage: For intermodal rates to rise significantly, there needs to be a shift in leverage towards carriers in the truckload market, a shift that has yet to occur broadly according to the Journal of Commerce Intermodal Savings Index.
Strategic Recommendations for Shippers:
Engage Early and Often: Start discussions with your carriers now. Understanding the value you gain from J.B. Hunt or similar providers can help in negotiations. Highlight your long-term partnership benefits and volume commitments.
Diversify Your Carrier Base: Don't rely solely on one provider. Exploring contracts with multiple carriers can provide leverage in negotiations and buffer against rate increases from a single source.
Monitor Market Signals: Keep an eye on freight demand trends. Tools like DAT Freight and Analytics and the Cass Freight Index can offer insights into when the market might shift in favor of carriers, giving you a strategic window to renegotiate terms.
Prepare for Flexibility: Be ready to adjust your logistics strategy mid-year. If market conditions improve, renegotiating could be beneficial, especially if initial agreements were set during a downturn.
Leverage Technology for Efficiency: Use advanced supply chain management tools to analyze your freight spend and efficiency. This data can be pivotal in justifying rate negotiations or exploring alternative shipping methods like intermodal if truckload rates remain high.
Conclusion:
At Gain Consulting, we are dedicated to ensuring your supply chain is not only resilient but also optimized for cost and efficiency in light of these upcoming changes. The increase in intermodal rates by J.B. Hunt is a clear signal of shifting dynamics in the transportation sector. By staying informed and proactive, you can navigate these changes effectively, ensuring your supply chain remains competitive and responsive to market conditions.
For personalized advice on how these changes affect your specific operations or for help in negotiating your 2025 shipping contracts, contact Gain Consulting today.
Let's strategize together for a successful year ahead.
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