Spot market growth gains remain intact, according to DAT data

Heavy spot market activity continues to remain a mainstay in the freight transportation market as records continue to be set. That theme continues to remain highly supported based on data issued this week by Portland, Oregon-based freight marketplace platform and information provider DAT.

The firm reported that spot market freight availability was up 50 percent on an annual basis in June, according to its DAT North American Freight Index, which measures truckload freight, demand, and capacity in the U.S. and Canada.

DAT officials said that demand in June was paced by robust seasonal fruit and vegetable harvests, as well as a surge of manufacturing and construction-related freight.

Annual increases were reported across the board for spot market activity for various equipment types in June, with van loads up 39 percent, refrigerated freight up 51 percent, and flatbed volumes increasing by 69 percent. The firm explained that higher demand and limited capacity, an ongoing theme in the trucking sector, spurred an uptick in June truckload rates, with the national average rate for the month seeing gains of 15 percent for vans, 10 percent for refrigerated, and 14 percent for flatbeds.

On a sequential basis, DAT said that June spot freight truckload volume was up 9.8 percent over June, with van and reefer freight up 20 percent, respectively, and flatbed up 3.7 percent. Rates were also up sequentially but not to the extent that volumes were, with average van rates up 7.4 percent, refrigerated up 6.4 percent and flatbeds up 4.4 percent. Total second quarter volume was up 4.9 percent compared to the first quarter, which resembles a typical seasonal trend, the firm said. 

In terms of what is driving the record-high volumes and rates within the spot truckload market in 2014, DAT cited:
-disruptive Q1 weather;
-an improving economy
-seasonal fluctuations of freight and capacity; and
-shippers relying more on 3PLs to secure freight and meet the needs caused by the growing volume of exception freight

Echo Global Logistics CEO Doug Waggoner recently told LM that spot market gains, both in terms of volume and rates, tie directly to the capacity shortage, with larger shippers running routing guides awarding lanes to carriers and brokers when they suddenly cannot get capacity and then turn to brokers in the spot market.

“Brokers have a much bigger rolodex of carriers so if I am a Fortune 500 truckload shipper and have got 100 carriers that are assigned to different lanes…when those 100 carriers cannot supply me the required capacity, I go to brokers that have tens of thousands of carriers,” he said.

Mike Regan, Chief Relationship Officer at TranzAct Technologies, said that current trends on the spot market are strong, as the DAT data indicates

But he noted the underlying reasons as to why that is the case are not always prescient.

“Some people point to a stronger economy, but it might have more to do with the discipline of the carriers in terms of how they run their equipment and maintain strong pricing,” he said. “More carriers can make more money running fewer trucks, a carrier CEO recently told me. And call-to-haul factors for each piece of equipment are running especially strong and allowing them to maintain discipline on the pricing side. I don’t know if the gains we are seeing are as much a product of demand as they are of pricing.”

When asked if the spot market volume gains and rate momentum can carry over into the second half of the year, Regan noted that remains to be seen.

One factor behind that has to do with GDP growth, which was down 2.9 percent in the first quarter, which could see the second quarter making up for it. Another reason is that July is typically one of the slower months for freight of the year.

“So that fact that the spot market is this strong at this time of the year tells me things could be slower in the September and October timeframe,” Regan said. “There is also the question if we are seeing a shortening in the cycle of back-to-school shipments and that type of stuff. And many larger carriers are still talking about idling capacity because they cannot find enough drivers. If GDP heads up over 2 percent, people may have a tougher time finding trucks than they already are.”