Trucking news: TransCore reports August spot market truckload volumes remain strong
September 19, 2011
August was another strong month for spot market truckload volumes, according to new data from TransCore.
The firm reported that August volumes represented the eighth straight month of record same month spot market freight availability, with a 47 percent increase in its North American Freight Index compared to August 2010.
Along with a nearly 50 percent annual gain, August volumes were up 4.5 percent compared to July. TransCore officials noted that a sequential increase from July to August is “atypical, seasonally,” as freight volumes tend to decline in August with an average decline of 2.9 percent over the last ten years.
Looking at rates, TransCore said that truckload freight rates, excluding fuel surcharges, were stable on a sequential basis in August, with national average rates for dry vans down 0.8 percent in August and up 2.4 percent annually. Reefer rates were down 0.6 percent from July and up 2.6 percent annually, while flatbed rates were down 1.1 percent sequentially and up 9.6 percent annually.
As LM has reported, shippers and carriers alike have said that the spot market is still
attracting 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 high, and gas prices are about a dollar higher than they were a year ago at this time.
Usually, the spot market rates are about 15 percent lower than contract rates. But this year, according to TransCore’s analysis, on a national average about 24 percent of lanes had spot market rates that were higher than contract rates during the second quarter.
While fairly tight capacity remains a driver for high spot market volumes, it stands to reason that will continue to be the case going forward.
“From an industry-wide perspective, there is a proliferation of freight brokers,” said Stifel Nicolaus analyst John Larkin. “We have not saturated the percentage of the market that can be brokered yet. In addition to CH Robinson being the 800-pond gorilla in this space, you also have all these other companies out there doing it, too. At the same time, most of the asset-based carriers are starting up brokerages. It is a rarity when you see a carrier that does not have a brokerage.”
As long as spot market prices run below contract market prices, Larkin said it will continue to be something shippers leverage.
What’s more, small carriers—many of whom have been flushed out of regional markets by big carriers moving into regional markets—have become increasingly reliant on brokers, because they are not large enough to have sales forces, explained Larkin. This puts these small carriers in a position where nearly all of their backhaul lanes have to be filled by brokers.
These carriers are often financially challenged without access to capital and old equipment, coupled with dealing with myriad industry regulations, while brokers are skimming off their profits to a degree, he said. Meanwhile, many large asset-based carriers strongly prefer filling their own loads, rather than turning to a broker for help, as they have enough scale and capacity to build on existing relationships with shippers and develop new ones, too.
Larkin said the main reason for this is that the rate ends up being too low after a broker takes a percentage, which does not leave enough for the carrier that takes the asset ownership risk.
As long as carriers are not adding capacity, the spot market will continue to gain steam, according to Lana Batts, a partner at Transport Capital Partners.
“Carriers today are not interested in adding capacity, because rates today are about equal to what they were in 2006,” said Batts, a partner at in a recent interview. “The price of a truck has gone up from $80,000 to $120,000 and fuel is up, too. Everything is more expensive, and the industry is still charging 2006 rates. It is not sustainable. Trucking is not as easy of a business to get into as it was before.”
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