DAT Truckload Volume Index highlights surging spot market rates in August

The August edition of the DAT Truckload Volume Index, which was issued this week by DAT Freight & Analytics, a subsidiary of Roper Technologies and operator of an online marketplace for spot market truckload freight, highlighted how spot market truckload rates approached all-time highs in August, with various trucking segments seeing rate and load-to-truck ratio gains.

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 up 1.1% from July to August and was up 0.8% annually. 

DAT’s data found the following takeaways for August:

• the load-to-truck ratio for vans rose for the fourth straight month, to 5.3, up 20% from July, and more than doubling the 2.3 ratio from August 2019;
• the national spot van rate average—at $2.22—was up 19 cents over July and up 41 cents compared to August 2019;
• the average spot line-haul rate for vans (the total minus fuel surcharges), at $2.02, marked the highest monthly national average on record and surpassed the -national monthly average contract rate for the first time, going back to January 2018;
• spot reefer volumes were down 5% from July to August, with the national reefer load-to-truck ratio, at 9.3, more than five times higher than the all-time low in April, at 1.7;
• the national average reefer spot rate—at $2.44 per mile—was up 14 cents, from July to August and up 30 cents annually;
• August flatbed volume was down 6.3% compared to July, and was off 16.4% annually;
• the national average flatbed spot rate—at $2.30 per mile—was up 10 cents compared to July and was up 11 cents annually; and
• the national flatbed load-to-truck ratio, at 31.5 reached its highest level going back to July 2018

DAT officials pointed out how spot van rates have been on what it called a “rollercoaster ride” throughout the ongoing COVID-19 pandemic.

“Typically, freight rates begin the year on a predictably downward slope and then rise to a peak in June and July,” the firm said. “But in 2020, by the end of March, spot van rates had jumped 15 cents per mile year over year only to drop 15 cents per mile below 2019 levels by May 1, a 30-cents-per-mile swing in just four weeks,” it said. “Since then rates have increased 62 cents per mile in just five months in what’s regarded as the longest continuous rate rally in the last five years.”

In an interview, Ken Adamo, Chief of Analytics at DAT, told LM that when comparing the current state of spot market rates and volumes, from early May when truckers were protesting in front of the White House, with rates hovering around $1.20-to-$1.30 per mile nationally (excluding fuel), to now, there has been what he called a pure linear run to historic five-to-ten year historic highs on the spot market for dry van.  And he added that it is probably a little bit lower on the reefer side, due to seasonal components, and that many restaurants across the country are not operating at full capacity, coupled with the lack of food service demand at schools, universities, and sporting events, among others.    

“But on the flatbed side, we are seeing continued growth, largely due to favorable home building conditions and home deliveries related to that, including roll-on roll-off cargo, at some of the Eastern ports,” he said. “It is really just bullish all around from a spot rate perspective. We are starting to see that bleed into contract rates as well. Spot rates are definitely above contract rates right now, to the extent that things were during the peak in 2018. We are seeing contract rates pick up a tiny bit, which I think is due to two primary factors. One is routing guide slippage. Carriers are lower in the routing guide for a reason, which is because they are priced higher, and if you tap into those carriers you have to pay more. Another factor is shippers offering voluntarily to pay higher prices to ensure their contract carriers are going to meet their commitments.”   

When asked about the impact of elevated import levels at West Coast ports on spot market activity, Adamo observed that outbound long-haul freight heading East and up North, into Seattle and Western Canada is currently bumping up against $3 per mile, while coming in from far away at barely $1 per mile.

“LA to Denver is a great example, as it is almost $4 per mile, but Denver to LA is something like $0.90 per mile, plus fuel,” he said. 

Adamo also broached the subject of what he called a typical rate ceiling, which is seen in more typical times. In this case, he said, shippers would delay, or spread out, the shipping of freight to try to mitigate some of these prices, like they did in 2018.

“But things are different now, in that freight is not sitting in that distribution or a store’s warehouse,” he said. “Instead, we are seeing inventory, as soon as it is off the truck, on store floors and being sold through. A couple of working theories we are seeing, in looking at data and talking to customers and partners, is that shippers may be willing to take even more of a rate increase from the spot market on the chin and even on their contract prices, because the inventory, especially on the retail side, is selling through so fast.”  

Looking ahead, Adamo said that the premise of spot market rates remaining at current levels through October comes with a caveat.

The caveat, he explained, is that any time you are up against these historic highs, it can be likened to stock market activity, in the form of a bull or bear run, where things get over or under sold, which results in a “creep back” prior to where the market looks to where it goes next.

“I would not ne surprised if we saw something like that,” he said. “But, in October, if [cargo] has moved over the ocean and landed stateside already and is moving through the supply chain, it will be a very good month. It is a question of whether the spot market will bear any more of a price increase…at a certain point, you are talking about $2.50 per mile plus fuel. That is a pretty unheard of amount to pay for freight for shippers that are moving 25%-to-30% of their freight via the spot market compared to, say, 10%-to-12% a year ago. That is a huge budget impact for them. There is also the question of will they sacrifice having the goods on the shelf to blow out their transportation budgets. There is no way to know the answer to that question.”