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Supply Chain News: After More than Two Years of Flatness and Decline, are US Truckload Rates at Last Poised to Head Up?


Spot Rates Up Sharply in May, as Volumes Continue to Rise, Perhaps Auguring Contract Rate Hike Later in Year

June 21, 2017
SCDigest Editorial Staff

Despite an always just around the corner major driver shortage, low diesel prices that make trucking relatively more attractive than rail, and what appears to be decent though certainly not robust freight volumes, US truckload rates have been basically flat for now about two and a half years.

But that good news for shippers and bad news for carriers may at last be changing - more on that in a moment.

Supply Chain Digest Says...

All this is also bullish for contract rates, DAT says, with contracts usually lagging spot market activity by about three months.

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The Cass Information Systems’ Linehaul Index measures US per mile truckload rates before fuel surcharge and accessorial fees. It is based on baseline level of 100 that represents truckload rates in January of 2005. Data within this unique index is derived from actual freight invoices paid by Cass for its clients.

As seen in the chart below, after rising substantially in 2014, the Index has basically been flat ever since, with the Index for April, the most recent measure, coming in at 124.6 - about two percentage points below where rates were in January of 2015.

Prior to that, February marked the end of an amazing 13 consecutive months of year-over-year declines in the measure, before that string was finally broken with the 1.0% gain in March versus the same month in 2016. The April number was flat with the prior year and 1% below April of 2015.

However, Donald Broughton with Broughton Capital, who works with Cass on the analysis of the Index data, says for trucking rates appears to be stabilizing.

While Broughton's full year pricing forecast remains at just -1% to 2% for 2017, he says that the current strength being reported in spot rates is leading him to believe contract pricing rates should move back into positive territory by the end of the year.

And spot rates indeed as of late have been strong, driven by increases in freight volumes. In fact, truckload spot market volumes in May reached their highest level since September 2015, increasing by 7.3% over April and 63% year over year, leading load board DAT Solutions reported this week.

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With solid increases in dry van and refrigerated freight volumes, and higher load-to-truck ratios, or the ratio of available loads to capacity, it appears the industry is leaving a two-year price recession "in the rearview mirror," said Mark Montague, industry pricing analyst for DAT.

Van and refrigerated volumes rose in May versus April by 16% and 19% respectively, DAT said. However, flatbed volumes slipped 2.4% month over month, in line with usual seasonal patterns, DAT said.

And DAT reported that total freight volumes were higher year-over-year for the tenth consecutive month. Volumes were pumped by a rebound from drought conditions in California, which affected van and refrigerated traffic for agricultural products positively, DAT said. Memphis, a major distribution hub, also reported strong van demand.

All that increase in volumes naturally is sending rates upward, with spot rates in the past two weeks rising for all three equipment types to their highest levels since 2015. Average van rates reached $1.69 per mile, gaining 2 cents compared to April and 15 cents year-over-year. The reefer rate was $2.02 per mile, an 8-cent increase compared to April and a 13-cent boost compared to May 2016. The flatbed rate was $2.10 per mile, up 3 cents month over month and 8 cents year-over-year.

All this is also bullish for contract rates, DAT says, with contracts usually lagging spot market activity by about three months.

So will shippers really see higher rates in the second half of 2017? The trend seems to be moving in that direction for the first time in almost three years - but in the end the real driver as usual will be US economic growth - or lack thereof.

Do you see or predict US truckkload heading higher at last? Let us know your thoughts at the Feedback section below.


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