Diesel costs squeeze truckload margins as rail offers 30% savings

Higher truckload contract rates are failing to translate into comparable profit growth as fuel, labour and insurance costs absorb the increase, according to FreightWaves. Its review of results from J.B. Hunt, Werner and Heartland Express points to renewed pricing strength but persistent margin pressure. Contract rates were 18% higher year on year, while diesel prices had climbed 72%, strengthening the relative cost advantage of intermodal transport.

J.B. Hunt reported a 24% increase in third-quarter operating revenue, supported by improved pricing, an 8% rise in intermodal loads and greater brokerage volumes. Net earnings, however, increased by just 1%. FreightWaves attributed the gap to driver-related spending, fuel and insurance claims. Werner’s preliminary release identified approximately $0.18 per share in combined cost pressures from fuel and driver recruitment and retention.

Heartland Express recorded an operating ratio of 98.7, deteriorating from the second quarter but improving against the same period a year earlier. The company cited fuel inflation alongside higher maintenance, repair and employee-related expenses. According to the report, Heartland is looking towards 2027 for contract rate increases sufficient to counter those pressures. Across the market, diesel averaged $6.37 per gallon in October, compared with $3.70 a year earlier, and was 27% more expensive than in July.

The widening cost gap is encouraging freight to move from road to rail. FreightWaves said the SONAR Intermodal Cost Savings Index indicated a 30% saving against highway transport, an advantage J.B. Hunt described as more than twice that seen in some earlier markets. The company’s intermodal revenue increased 20%. Revenue per load rose 11%, but the increase narrowed to 2% once fuel was excluded. Shortages of drayage capacity at both ends of rail journeys are restricting the pace of conversion.

Other indicators also pointed to constrained capacity. FreightWaves reported that the SONAR STRI stood at 13.5%, up 5.6 percentage points year on year, while the loaded outbound rail index for 53-foot containers increased 10%. J.B. Hunt’s brokerage revenue rose 57%, with loads up 22% and revenue per load roughly 29% higher. Even there, personnel and insurance expenses offset part of the gains.