Supply Chain Managers See Little Change in Trucking Spot Market Rates

While the months on the calendar continue to change, the situation when it comes to spot market activity remains consistent in terms of annual gains.

This thesis was evident in data recently issued by Portland, Oregon-based freight marketplace platform and information provider DAT.

DAT reported that May marks the 11th straight month to see an annual record high for spot market freight volume, with its DAT Freight Index in May seeing a 40 percent annual increase.

While the reasons for high spot market activity can vary, DAT cited many reasons for why it continues to be hectic going back to July 2013, including last winter’s weather, the regulatory environment, and the ongoing driver shortage.

While the spot market again saw increased annual activity, DAT reported that on a sequential basis, freight volumes dropped 2.1 percent from April to May.

DATA reported the following data for May: -dry van freight volume, refrigerated freight volume, and flatbed freight volume was up 25 percent, 18 percent, and 85 percent, respectively, compared to May 2013; -van freight availability was up 1.0 percent from April to May, reefer was down 4.8 percent for the same period, and flatbed volume was off 1.6 percent.

On the rate side, DAT explained that the combination of higher capacity and capacity constraints led to what it called added rate pressure, with average van rates on the spot market up 18 percent annually.
Other rate shifts included the average reefer rate seeing a 20 percent annual increase and flatbed rates up 12 percent compared to May 2013. Sequentially, van rates dropped 2.0 percent from April to May, with reefer rates up 3.4 percent, and flatbed up 1.1 percent.

Even with these annual gains, there appears to be some normalcy within the spot market, according to BB&T Capital Markets Analyst Thom Albrecht.

“The freight world remains busy, albeit not chaotic like it was in Q1’14, as networks and freight flows have normalized,” he wrote in a research note. “Carriers are experiencing yr/yr volume increases and rate improvements, but in our opinion 2014 is not the tipping point carriers believed it was in February and March. As we have written, we believe this is a transitional year, akin to 2003 (capacity tightened, rates began to rise), but not 2004 (Carrier “Nirvana”). The creeping regulatory burden and the deteriorating driver situation all point to gradual capacity tightening in 2015 and 2016, but this year will have some occasional fits and starts.”

Echo Global Logistics CEO Doug Waggoner recently told Logistics Management - a sister publication - that spot market gains, both in terms of volume and rates, tie directly to the capacity shortage, with larger shippers running routing guides awarding lanes to carriers and brokers when they suddenly cannot get capacity and then turn to brokers in the spot market.

“Brokers have a much bigger rolodex of carriers so if I am a Fortune 500 truckload shipper and have got 100 carriers that are assigned to different lanes…when those 100 carriers cannot supply me the required capacity, I go to brokers that have tens of thousands of carriers,” he said.

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