By Mark Montague
It’s the most wonderful time of the year—at least, that’s what retailers seem to be thinking as they kick off the holiday shopping season.
Last month, the Wall Street Journal reported a 6% increase in container freight arriving at the ports of Los Angeles and Long Beach during the summer compared to 2012, an indication that retailers have beefed up their stocking orders.
We saw this reflected on the spot truckload freight market in September. While a 6% increase isn’t going to exhaust excess shipping capacity, it did have a noticeable effect on spot-market volume and rates in Southern California during September.
The first sign came at the end of September, just as the quarter ended. We saw a spike in outbound rates from a zip-code cluster that includes the Port of Los Angeles and Port of Long Beach, the U.S. transit point for most Asian imports. Outbound truckload freight availability from Los Angeles increased 38% during the second half of September compared to the first two weeks of the month, and overall load volume for the month was up 52% compared to the same period in 2012.
It may seem odd for truckload spot-market volume to jump by double digits on a seemingly modest 6% increase in imports. That’s because most outbound freight from the ports is handled under ongoing contracts. A large share of that “extra” import traffic is likely to be non-contract “exception freight” and therefore available to freight brokers and 3PLs for spot-market transactions. The spot market represents about 15% of total truckload freight movements, depending on the season. So 15% of that 6% increase is a lot of truckloads.
The Effect in Other Hubs
Then we saw another sign that retail goods are moving: outbound rates for vans began to soar in Chicago, an effect of the freight moving out of L.A. This indicated that these consumer goods were already transitioning through wholesale and retail distribution centers in the Midwest.
Other markets reacted, too. From Sept. 30 to Oct. 6, freight availability and rates dropped in Los Angeles and Chicago but rose sharply in Houston (volume up 32%) and Charlotte (up 54%.) The Port of Houston commonly receives goods from South America via the Gulf of Mexico and from Asia via the Panama Canal. Charlotte is an inland hub, serving the Atlantic seaports of North Charleston and Savannah, which receive goods from Europe as well as South America. Columbus also saw a 67% volume increase as freight moved in and out of distribution centers there, causing load availability to rise and fall in alternating weeks.
All across the country, the freight has been flowing steadily throughout the summer months and deep into September.
Year-over-year, the DAT North American Freight Index, which reflects spot market freight availability on the DAT network of load boards in the United States and Canada, was up 22% in September and reached the highest level recorded for that month since the Index was established in 1996. Overall third-quarter volume was up 13% compared to the same period in 2012, and volume for the first nine months of 2013 was 1.8% higher than it was in 2012.
As for rates? Year-over-year, spot-market van rates in September increased 3.8%, reefer rates rose 4.5%, and flatbed rates declined 8.1% compared to September 2012. For all their work in September, truckers may have a little more change in their jeans when they do their shopping this year.
Consumer research firm ShopperTrak predicts only a 2.4% increase in purchases for November and December of this year compared to 2012. Other analysts, including the National Retail Federation, warn that consumer confidence may be affected by the federal government’s handling of the budget and deficit.
Of course, full shelves don’t necessarily translate to retail sales (at least, not until the stroke of midnight on Dec. 26). But the lesson from September is that the clues to freight conditions are all around us, and especially in the ripple-like movements of non-contract freight.
Mark Montague is the industry freight analyst for DAT, which operates the DAT® Network of load boards and RateView analysis tool based on the matching of more than 68 million spot (non-contract) loads and trucks per year. He holds an MBA in Transportation from Indiana University as well as a Bachelor of Science degree in mathematics and has applied his expertise in rates and routing for carriers, 3PLs, and shippers for more than 30 years. He is based in Portland, Ore. For information visit www.dat.com.