4 Reasons Why the Freight Market Shifted

By Mark Montague

Continuing a pattern of steady improvement in 2014, June marked the 12th straight month of year-over-year increases in load volume on the spot truckload market, according to the DAT North American Freight Index, a measure of freight demand and capacity in the U.S. and Canada. 

The number of available spot loads was up 50% in June compared to the same month in 2013. Higher demand for trucks, together with capacity constraints, propelled spot-market truckload rates steadily upward across all major equipment types: the national average van rate was up 15%, the reefer rate gained 10%, and the flatbed rate was up 14% compared to June 2013.

Then, during the week of the Fourth of July holiday, van and reefer rates shot up 7 cents to $2.15 and $2.49 per mile, respectively. Flatbed rates jumped 10 cents to $2.54 a mile.

That’s a big leap for one week, especially at that time of year. Rates tend to drop like a rock from June to July. Instead, they rose like a rocket. What was that all about?

In this case, a few factors contributed to the abrupt shift in rates during the last day of June and first week of July. Keep them in mind any time you see atypical results from week to week:

  • End of quarter. The second fiscal quarter closed on June 30 (a Monday) and some shippers needed to just load freight on a truck in order for it to be credited toward their quarterly revenue. In Q2, there was extra pressure on many companies to make up for lost productivity and lackluster Q1 results. When shippers are motivated, they’re often willing to pay more for capacity.  
  • Friday holiday. It was a short work week, which added to the pressure on companies with goods to ship. Capacity was constrained, too, as many carriers and drivers were happy to park their trucks for a three-day weekend.
  • Time-sensitive inventory. A whole range of holiday-themed merchandise must be on the shelves before July 4, not the least of which are “picnic” perishables like meat, berries, and baked goods. Nobody is going to pay extra for red-white-and-blue cupcakes on the 5th of July.
  • Potential port strike. Shippers accelerated the pace of imports from Asia to avoid the risk of a dockworkers’ strike at West Coast ports. Retailers in particular were concerned about supply chain disruptions as they awaited shipments of back-to-school products and holiday merchandise. The National Retail Federation said inbound container traffic increased more than 7% during May and June compared to the same months in 2013. Once goods arrived, shippers wanted those items out of the ports and into inland warehouses, ASAP. A higher percentage of this freight found its way to the spot market and there was serious demand for trucks to move it.

I monitor changes in rates, demand, and available truckload capacity all day long. In addition to customized real-time analysis, we release reports for public consumption every week.

Weekly reports are useful but if you want to really understand the dynamic pressures and trends that shape your business every day, you have to do two things.

First, think local. National trends are just a composite of local ones, and sometimes they contradict what’s happening in your markets and lanes.

For instance, if half the lane rates rise a lot, and just as many lane rates drop (but not very much), the national average rate will rise. That 30,000-foot national view is nice, but if you’re in a quiet market where there are a lot of idle trucks and not much outbound freight, more detail would be valuable.

Second, don’t let the ups or downs distract you. For example, while spot rates were surging during the week ending July 5 (the van rate was at an all-time high), overall load board volume fell 21%. Alarming? Confusing? Not really when you consider that the Friday holiday accounted for 20% of the work week. By July 12, spot market capacity and load availability had settled back to within seasonal norms and rates were falling away from the extraordinary highs of the previous week. 

When you’re looking at market indicators, seek out the most granular data available and also identify events that might cause a shift. Like the three-day weekend coming up in September. 

Mark Montague is manager, industry rates, for DAT Solutions, which operates the DAT® network of load boards. As a mathematician and statistician, he has applied his expertise to logistics, rates, and routing for more than 30 years, and was instrumental in developing DAT’s RateView truckload rates and analysis product. Mark is based in Portland, Ore. For information visit www.dat.com.