This Time, It’s Business

By Mark Montague

For the better part of six months, it has seemed like every economic report blamed the weather for uncomfortably tight capacity and higher rates in the trucking and intermodal industries.

True enough, winter exacted a terrible toll on supply chain productivity. And while all those re-scheduled freight moves sent spot market volume and truckload rates soaring, overall truck freight tonnage was on par with 2013 levels and economic growth was nil. As capacity and rates normalized in April, signs pointed to softer-than-unusual freight activity in May and June. 

Instead, volumes surged. Demand sizzled.

By June 14, the national average spot market rate for van freight was $2.07 per mile, just shy of the all-time record of $2.10 a mile set in March. The national average reefer rate hit $2.38 a mile as produce markets transitioned from the Southeast to the West, while the national average flatbed rate rose to $2.44 per mile. 

Compared to May 2013, the average van rate was up 18%, the average reefer rate jumped 20%, and the flatbed rate increased 12%.

What’s going on? It’s not the weather, it’s business.

Manufacturing in the United States increased 0.6% in May as companies began rebuilding inventories. New factory orders hit a five-month high. Construction spending is up. Nationally, produce shipments in May are only 3% behind last year’s numbers, according to USDA. Pressure is building in most agricultural markets with the possible exception of drought-stricken Central California, where harvests have lagged.

Freight volume for vans, the predominant equipment category, was up 25%. Refrigerated freight volume increased 18%. Flatbed freight volume rose 85% compared to May 2013.

On June 14, the overall load-to-truck ratio spiked to 10.1 nationwide, meaning there were 10.1 loads for every truck available on DAT load boards. The ratio was 4.2:1 for vans, 11.1:1 for reefers, and 48.5:1 for flatbeds.

Truckers With the Upper Hand

There have been only a few times since the industry was deregulated in 1980 that truckers have had the upper hand in their dealings with customers. We’re getting close to that tipping point now:

  • The shortage of qualified drivers and rising costs for equipment and maintenance are pushing marginal carriers out of the marketplace. The latest example is the bankruptcy of New Century Transportation. With 900 power units and 1800 trailers, it’s the largest carrier to fail in more than a year.

  • Big fleets are reluctant to add more trucks because they don’t have experienced drivers.

  • Through June 1, U.S. rail volume was up 3.2% and intermodal volume was up 5.8% compared with the same point last year. Rail capacity remains tight.

  • The threat of a West Coast port strike prompted retailers to bring in goods early for the back-to-school and holiday retail seasons, adding pressure on capacity and rates. Increased volume and rates out of Columbus, Ohio, and Chicago can be viewed as indicators of retail inventory re-stocking as well as preparation for the back-to-school season.

After the brutal weather last winter and spring, I’d like to say we’ve earned our time to bask in the sun. Just don’t fall asleep and get burned. Whether you’re a shipper, carrier, or load broker, you need to monitor shifts in demand, capacity, and rates more closely than ever now. They can change quickly, even in those same lanes you’ve been working for years.

Mark Montague is the industry freight analyst for DAT Solutions, which operates the DAT® Network of load boards. He has more than 30 years of experience analyzing rates and routing in the commercial transportation industry. He is based in Portland, Ore. For information, visit www.dat.com.