Yellow shutdown likely means LTL price increases, analysts say

The low-cost carrier’s rivals see an opportunity to bring in loads at higher rates as bankruptcy looms.

Published Aug. 4, 2023

David TaubeAssociate Editor

First published on

Yellow Corp.’s shutdown has left shippers without a major player in the less-than-truckload space — a development that means higher costs are likely in store, according to trucking industry analysts. 

“There’s probably going to be an increase in the pricing charged to the shipper,” said Craig Decker, who leads investment banking activities across supply chain, logistics and transportation areas at Brown Gibbons Lang & Co.

The price difference could be a 20% to 25% price per pound increase depending on the circumstances, DAT Chief of Analytics Ken Adamo suggested on a weekly market update show. All together, he said the price increases could be 7% to 10% higher.

“[If] you decided late last week to send ArcBest, Old Dominion, XPO and FedEx Freight your data to get some rates back, probably by late this week you’re going to be fully processing the sticker shock of how much of a price increase you’re going to have to take over what Yellow was charging you,” Adamo said.

XPO executives noted Friday on a Q2 earnings call that Yellow’s shuttering is disrupting the market and accelerating their pricing. ““Our customers understand: When you take 10% of capacity out of the market, it’s going to cost more to move freight,” incoming CFO Kyle Wismans said.

The increase to rates comes as a result of Yellow’s role in the trucking market: Shippers who relied on the low-cost carrier are likely left with higher-priced alternatives, analysts said.

“As one of the US’ most cost-effective LTL transport companies, businesses switching from Yellow to a more expensive rival carrier will experience a twofold cost increase,” Charles Haverfield, CEO of U.S. Packaging & Wrapping, said in emailed comments. 

Haverfield said this is particularly true if shippers have not built relationships with other carriers to secure discounted prices or if they switch to smaller trucking companies that cannot leverage Yellow’s economies of scale to lower prices for their services.

“The best approach is for businesses to adopt a comprehensive approach, encompassing both major carriers and smaller freight companies,” Haverfield said.

Shippers had been diverting freight to other carriers, brokers and the spot market even before Yellow confirmed it was shutting down terminal operations and laying off workers.

https://www.transportdive.com/news/yellow-shutdown-could-lead-to-ltl-price-increases-analysts-say/690008/