Trucking spot market seeing gains from tight capacity

As truck tonnage levels show decent annual growth levels with capacity remaining tight, it does not come as a surprise to see the trucking spot market continue running along at a swift level.

That is the consensus from TransCore which said in a recent release that truckload freight availability increased by 12 percent for the week ending March 5, according to traffic in its TransCore TrendLines report.

The firm reported that load volumes increased for all equipment types for the week ending March 5, with a 15 percent gain in freight designated for vans, while truckload freight capacity fell by 5 percent on the spot market week-over-week, showing how truckload capacity remains tight. TransCore also pointed out that the load-to-truck ratio for dry and reefer vans was up 22 and 23 percent, respectively, with the ratio for flatbeds up 15 percent.

This data follows recent updates from the American Trucking Associations (ATA) and Cass Information systems that are viewed as two of the biggest benchmarks for trucking market conditions.

The Cass Information Systems Freight Index was down in both December and January. But February shipments at 1.036 were up 11.4 percent year-over-year and up 4.6 percent compared to January’s 1.010.

The ATA’s advance seasonally-adjusted (SA) For-Hire Truck Tonnage index was up 3.8 percent in January on the heels of December’s revised 2.5 percent (from an original 2.2 percent) gain. These gains were preceded by November’s revised 0.6 percent decline (up from -0.1 percent) and a cumulative 2.8 increase over September and October. And on an annual basis, the SA index was up 8 percent compared to January 2010, which the ATA said is the largest increase since April 2010.

“The spot market is the segment of the market that is under the most stress,” said Noel Perry, FTR Associates Managing Director and Senior Consultant. “And March is the beginning of the seasonal spike in volumes, so I would expect to see what we are seeing now in the spot market.”

Perry added that at the moment on the supply side there is a belief that smaller fleets that made up a high portion of spot market capacity are the ones that are most targeted during the downturn, which, in turn, leads to restricted supply. What is happening with the spot market now, he noted, is a reflection of the upturn in the economy coupled with capacity tightening.

A report from Donald Broughton, an analyst at Avondale Partners, stated that the Avondale Truckload Spot Market Index is also showing that capacity is relatively tight, although it has leveled off in recent months.

“While it remains at nominally high levels and is showing ~60% YoY growth, the current directional trend suggests contract rate increases in the mid to low single digits, rather than the high single digit increases expected by some,” wrote Broughton. “Rate increases in low to mid single digits are certainly a positive for the TL carriers, however me remain cautious given that cost headwinds (i.e. driver pay, fuel, equipment) may offset much of the gains seen from pricing.”