DAT Truckload Volume Index breaks more records in October

An ongoing string of new records remained intact, with this week’s release of the October edition of the DAT Truckload Volume Index, which was issued by DAT Freight & analytics, an online marketplace for spot market truckload freight, as new records were again set for the national average spot truckload rates for dry van and refrigerated (reefer) freight. 

The DAT Truckload Volume Index reflects the change in the number of loads with a pickup date during that month, with the actual index number normalized each month to accommodate any new data sources without distortion, with a baseline of 100 equal to the number of loads moved in January 2015. It measures dry van, refrigerated (reefer), and flatbed trucks moved by truckload carriers. Over all, the index increased 3.8% from September to August and was up 8.7% annually. 

DAT’s data found the following takeaways for October:

• the load-to-truck ratio for vans rose headed down after five straight months of gains, to 4.3, following a two-year high of 5.5 in September, and was 21.8% lower compared to September but more than doubled the October 2019 ratio;
• the national spot van rate average—at $2.40—was up 3 cents over September and up 60 cents compared to October 2019;
• the average spot line-haul rate for vans (the total minus fuel surcharges), at $2.21 per mile, marked the highest monthly national average on record, for the third straight month and surpassed the national monthly average contract rate for the third straight month, too;
• spot reefer volumes increased for the first time in four months, rising 5.1% compared to September, with the national reefer load-to-truck ratio, at 8.7, more than five times higher than the all-time low in April, at 1.7;
• the national average spot reefer rate, at $2.59 per mile, was up 2 cents compared to September and up 48 cents annually;
• the national flatbed load-to-truck ratio, for October, at 37.1, was below September’s 40.3, its highest level since June 2018; and
• October flatbed volumes rose 1.6% over September and were down 11% annually; and
• the national average spot flatbed rate, at $2.45 per mile, rose 4 cents compared to September and rose 28 cents annually

DAT Chief of Analytics Ken Adamo told LM in an interview that October’s data was exactly in line with what the firm may have expected.

“It kind of fell right between our high and our low case, in terms of how we were thinking about it,” he said. “We ended the third quarter incredibly strong. October started out a tiny bit slower and really started to gain steam the last few weeks of the month, and that has continued into the first couple weeks of November.”

When asked about the impact of these record spot market data points on shippers, Adamo explained that there has been what he called a “slide” down the routing guide, with shippers not seeing an immense amount of freight falling down the routing guide, but instead seeing much higher percentages slip out from the first and second carrier calls, which can really inflate rates.

“And we are definitely seeing a higher percentage [of freight] move to the spot market,” he said. “The numbers are not binary, not all freight goes to the spot market. It is typically 10%-12% spot. The fact that it is going even 20-25% spot for some shippers now is impactful. One reason for that is they are not used to shipping that much spot volume, as spot rates are up substantially both annually and sequentially and have been on a tear since the late May, early June timeframe. Shippers are moving more freight at a higher price, and that is really impacting their budgets.”

Adamo also observed that a lot of shippers are in RFPs right now, as they delayed them from the first and second quarters, due to the pandemic, adding that many shippers thought that rates might come back down and did not want to go out to bid during a peak rate period and were forced to go out to bid in the fourth quarter, which he said is very abnormal, especially for retail-driven shippers.    

On the capacity front, given the current level of tightness in the market, Adamo said that can manifest itself, for a few different reasons and represent a combination of things.

“To me, it is much more indicative of demand just being crazy elevated right now, in that you cannot just manifest trucks out of thin air,” he said. “Absolutely, we are in a capacity crunch because we cannot add capacity that fast, as demand has been off the charts. The September and October numbers were both extremely high, as were Class 8 truck and trailer orders. The market is moving to add capacity, but I don’t buy into the notion that there is a ton of capacity out of the market right now, as much as it being completely outrun by demand.  

Looking ahead into early 2021, Adamo said it is likely things will slow down, as there is a fair amount of concern among brokers and carriers in regards to waiting for the bottom falling out of the market.

“When we see that seasonal slowdown, it still may be well below last year, or the last ten years, but we will see demand taper off after the holidays,” he said. “[Things] may contract and rates might sell off. A lot of people subscribe to the notion that rates are overbought right now and higher than the market. There is some apprehension among carriers especially that at the first sign of the market turning, there will be people saying ‘I told you that this was never going to last,’ and you might see a bit of a sell off, with some abhorrent downward pressure on rates.”

What’s more, the market and seasonality will dictate a slowdown in January and February, according to Adamo, adding that the DAT team is keeping an eye on April 2021 through July 4, to see how that period looks.

And that period is likely to bring stiff annual comparisons for both spot and contract freight, in that outrunning those annual comparisons, even with strong fundamentals, becomes incredibly difficult, especially in the June, July, August timeframe, when rates were up 40% annually, he said, which is really hard to outrun.

Over the next few weeks, Adamo said he does not expect demand to drop off, saying November will be a busy and bullish month and remain on trend.

“The only thing that could impact things is a shutdown of the economy during the highest period of consumer spending of the year would be much different than a shutdown in March or April, when consumers are not spending that much money,” he said. “[States] have to weigh those options. I really think we are kind of locked in.”