Spot market trends are healthy, according to TransCore data
July 16, 2012
Data released by TransCore showed mostly positive messages regarding freight volumes and spot market conditions for the month of June.
TransCore’s DAT North American Freight Index, which reflects spot market freight availability on its network of load boards in the United States and Canada, posted a 6.3 percent gain in June on an annual basis while setting a same-month record for highest freight volume in the month of June.
While annual volumes were up more than 6 percent in June, TransCore said freight volumes were off 2 percent compared to May. The firm explained that this sequential decrease is atypical in that freight volumes typically peak in June, increasing on average by about 12 percent from May to June.
In June, truckload freight rates saw gains for all spot market categories compared to May, according to TransCore. Dry van, flatbed, and reefer rates increased 4.4 percent, 3.4 percent, and 7.9 percent, respectively. And on an annual basis spot market dry van rates increased 4.4 percent compared to June 2011, with flat bed and reefer rates up 2.3 percent and 3.5 percent, respectively.
While June set a single-month record and spot market rates were up across the board in June, this data does not reflect a healthy economic outlook, due to factors such as high unemployment and cautious consumer spending.
It speaks more to tight capacity and limited truck availability, which in turn has helped motor carriers regain pricing power, which was largely lost during the depths of the recession and has been trending back into carriers’ favor since mid-2010, according to anecdotal reports.
And as LM has reported, shippers and carriers alike have said that the spot market is still demanding top dollar rates, as carriers are reluctant to add capacity at a time when the economic recovery appears tenuous, retail sales are flat, unemployment is still high, and gas prices remain higher than they were a year ago at this time, although the gap has been closing in recent weeks.
“These numbers are primarily driven by a capacity shortage” said David Schrader, SVP/Operations for TransCore, in a recent interview. “More freight tends to flow into the spot market…to brokerages and 3PLs as the economy tightens. That is what happened in 2011, and it is what we expect to happen in 2012, too. We would expect the same sorts of increases in the spot market going forward. It is a very good time to be in the brokerage space, and what you are seeing is brokerages that are capitalizing on the opportunity.”
Carriers are also benefitting from the spot market, too, according to Schrader, in the form of rate increases and utilization.
Roughly 80 percent of the carrier base which TransCore bases its data on have fleets of ten trucks or less. This serves as a major reason as to why the spot market is so efficient at connecting supply and demand together, he explained.
Doug Waggoner, CEO of Echo Global Logistics, a non-asset based freight brokerage company and a provider of technology-enabled transportation and supply chain management services, recently noted that is likely pricing will continue heading up.
“If you think about it, we have not really had any significant economic recovery so things are tightening up without that,” noted Waggoner. “If anything, the economy has probably softened in recent months. Should there suddenly be 5-to-6 percent GDP growth, it would be brutal out there. Someday we are going to get back into that robust recovery mode.
Between regulations, the driver shortage, an anemic economic recovery, and aging equipment, there is a ‘perfect storm’ that is going to continue to give carriers pricing power. And when prices go up higher, they will add capacity; they always do. It is supply and demand. At a high enough price, you are going to create additional supply.”
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