Van truckload spot rates (short-term, transactional freight prices that reflect the balance of supply and demand in the truckload market) have fallen about $.02 per mile per day in the past four days, according to FreightWaves National Truckload Index. The rates are linehaul only (transportation of goods by any means between two specified locations), fuel excluded, with a seven-day moving average. During the previous three weeks, spot prices for van truckloads dropped by $0.007 per day and $0.011 per day.
The rate of deterioration is astonishing considering the season. May and June are often the busiest months for truckload volumes, and early summertime rivals the holiday shopping season in terms of maximum spot prices.
The trucking industry refers to this period as the “100 days of summer” since it is when sales of summer goods, such as alcoholic beverages and construction materials, are at their peak. Surprisingly, the reverse is happening this year.
For nearly two months, DAT, one of the FreightWaves’ most vocal detractors, had disputed its assessment of the spot market’s fragility.
On the other hand, DAT has now reversed its stance and claims that the rate of decrease is historic. In a May 10 market update, DAT’s analyst commented that “in the entire history of Ratecast, it has not observed a drop of this magnitude and duration.”
According to FreightWaves, it has led the market in warning about the worsening marketplace for two weeks.
The reduction coincides with the transportation industry experiencing its largest-ever cost rise. Moreover, rising wages, insurance, equipment, maintenance, and gasoline costs are squeezing spot freight carriers.
The retail fuel price increased by $0.53 per gallon just last month. In dollars per mile, this means an increase of $.08 for a carrier that gets 6.5 miles per gallon.
Spot rates have dropped by $0.28 per mile in 30 days. Trucking spot carriers must deal with a $0.36 per mile headwind, increased diesel fuel costs, and decreased spot linehaul fares.
In the past few years, large carriers have remained mostly disconnected from market circumstances in the spot market. These carriers procure 90% of their cargo freight through the contract freight market and thus do not experience wild swings in the spot market.
To transfer long business contracted obligations to weekly and quarterly mini-bids, shippers must trust the market’s stability, or the disparity between spot and contract rates must be considerable.
In particular, several food shippers have reported they are waiting until the produce season has ended before making any contract price adjustments.
According to FreightWaves, channel tests show that such a process has already begun, at least among providers that do not include trailer pools in their routing guide. Consequently, capacity reserved by a spot rate carrier is likely under strain but may also have loads offered to freight brokers under a contract rate.
FreightWaves statistics on contract van rates do not currently reflect this, but contract rates are not increasing either. Never before has there been such a significant disparity between spot and contract rates.
The spread of the contract-to-spot rate was $0.77 per mile through April 26, 2022. Contract prices are released on a 14-day delay.
The contract fee for a van was $2.94 per mile, while the spot rate for a van was $2.17 per mile. Fuel is not included in either of these prices. The linehaul spot price has declined by $0.15 per mile since April 26, 2022.