TCP survey shows that carriers continue to be active in the spot market

Recent data from Transport Capital Partners’ (TCP) quarterly Business Expectation Survey noted that freight transportation carriers overall are using fewer brokerage services as a share of total revenue.

This survey, which TCP said polled about 120 carrier executives, found that in both the percentage of carriers using more or less brokerage services in both February 2011 and August 2011—with 12-to-15 percent using more—and 82-to-86 percent using less—was very similar. But the most recent batch of data revealed that the number of carriers saying they are using more brokerage services doubled from 15 percent in August 2011 to nearly 33 percent in February 2012, with 67 percent saying they are using fewer brokers.

TCP officials explained that load boards are indicating that spot rates in lanes are above long-term rates, with first quarter slowness possibly persuading carriers to look for broker loads to keep drivers and equipment busy.

The survey also stated that there are more large carriers—with $25 million or more in revenue—are leveraging brokers more than smaller carriers are but not by much, with 34 percent of larger carriers compared to 28 percent of smaller carriers using brokers. The firm also pointed out that is likely because carriers can get higher rates on the spot market.

“It is interesting to look at this data and think back to how things were on the brokerage side when the economy was terrible in 2009,” said Lana Batts, TCP partner. “Back then, there just wasn’t any freight and people were going everywhere they could to possibly get freight. Then when the recession was over in February 2011, carriers felt they had all the freight and customers they needed and felt they did not need to go back to brokerages. Now, they are going back to brokerages because there is a shortage of equipment and they are getting better spot market rates than they are getting out of their contract rates.”

Brokerages tend to do well when there is an imbalance, Batts explained. That imbalance is related to there not being enough freight or not enough trucks.

The 2009 imbalance was brought on by a lack of freight, due to the recession, whereas the issue less than three years later—through February 2012—has to do with a lack of trucks.

“I suspect that this number of carriers using more brokerages will be up even higher in a few months,” said Batts. “What is comes down to is carriers can get more money for non-contractual freight, given that their equipment is high-priced and driver pay rates are going up, it makes sense.”

The truck imbalance is not likely to abate anytime soon, considering that truck production is increasing on the heels of a three-year period where truck sales were low and below replacement levels.

What’s more, Batts said it will be until at least mid-2013 when there will enough trucks to overcome the fact that there is a normal attrition of trucks that come out of the market every year because they are worn out—with the current number at about 12,000 trucks per month.

“There remains a shortage of trucks and a shortage of truck drivers, and we have seen with our last few surveys that motor carriers are not interested in adding a lot of new capacity and cannot find drivers,” noted Batts. “And as long as there is a shortage rates are going to go up. Carriers would like to add capacity as long as their carriers don’t add any.”