DAT reports strong spot market activity in January

While there are some broad signals that the economy is in recovery mode, those signals were especially loud and clear in January spot market volumes, according to data released by DAT, a subsidiary of Portland, Oregon-based TransCore.

TransCore said that its DAT North American Freight Index saw a 42 percent annual gain in January. It added that sequentially January was 24 percent ahead of December, marking the first time since it DAT launched its index that freight availability rose from December to January. The firm noted that going back ten years there has been a 13 percent average decline in freight levels between December and January.

For specific trucking segments, DAT reported the following sequential and annual data:
-van loads increased 16 percent and 36 percent annually
-reefer freight volume rose 14 percent and 32 percent annually; and
-flatbed freight availability was up 28 percent and 7.9 percent annually

DAT said that even with strong freight volumes truckload capacity was loose on the spot market, with rates seeing a seasonal January decline as van and flatbed rates fell 2.4 percent and 2.0 percent, respectively, not including the fuel surcharge. Annually rates for van were up 2.4 percent, and flatbed rates were down 5.7 percent. Reefer rates saw an 8.6 percent rise.

David Schrader, senior vice president of DAT’s freight matching business, said that   several things contributed to the seemingly contradictory market activity reflected in the DAT North American Freight Index in January—that is, a big increase in the volume of freight without a corresponding rise in rates.

“According to Mark Montague, DAT’s industry pricing analyst and chief market-watcher, extraordinary things are happening with higher levels of exports to Brazil, China, and Mexico,” he explained. “Much of this export freight is industrial freight, which tends to be spot-market freight. Also, according to industry reports, the ‘contract marketplace’—i.e., freight shippers directly contracting loads out to carriers—shrank by 2.5 percent in January. This would have forced capacity into the spot market, which, while robust, is smaller than the contract marketplace. The net-net of all this is that loads as well as trucks (capacity) greatly increased on the spot market in January.”

The net impact on spot market rates through most of January was negative, as the excess capacity in the marketplace competed for available loads, according to Schrader. And regarding contract rates, in January, he said, it appeared that shippers were cautious about committing to higher contract rate volumes due to conflicting signals about consumer demand. And when fuel prices increased recently, carriers realized the need to adjust pricing, which he noted is contributing to higher fuel surcharge numbers (calculated) in most regions of the U.S, with the result that the overall net rate rising.

Even though the spot market is growing while freight volume is contracting, Schrader said that it is not something that is unheard of altogether.

“The spot market often absorbs the effect of a mismatch between demand and available capacity in the larger freight market,” he said. “This mismatch can occur because of unexpected or large-scale changes in the freight marketplace or even in the economy. Specific markets, regions, and/or equipment types may be affected disproportionately, or there may be a broad trend among shippers to respond to economic conditions in a certain way.”

As for the impact of the recent Northeast storm, Nemo, on spot market rates, Schrader pointed out that it brought no immediate evidence of rate increases, but some freight movements may have been delayed.

And as for January’s trends holding up in February, he said that if January was the unexpected trend, February data is shaping up as one might expect in a dynamic market.

“We’re seeing increased demand regarding spot freight plus tightened capacity contributing to a rise in the line-haul rate,” he said.

Robert W. Baird & Co. analyst Benjamin Hartford wrote in a research note that underlying trends appear stable; and expectations for a gradually improving U.S. economic backdrop are supportive of +1.5-2.0 percent core truckload pricing growth in 2013.

Despite these trend lines, shippers are holding their own in a market which currently sees carriers with the upper hand when it comes to rates.

“Our Carrier Management Program focus over the last few months has been increasing first time tender acceptance compliance,” said Joshua J. Dolan, director of transportation at Dick’s Sporting Goods in Pittsburgh, Pa., in a recent interview “We’re seeing our own internal need for spot freight reduce with the exception of expected instances.”