DAT’s Adamo provides insight into current truckload spot market data

While the truckload spot market finished 2020 from a position of strength, in that it hit various highs, DAT Freight and Analytics recently pointed out that spot rates have subsequently fallen 10% since the end of the year and are pegged to head down another 8%-to-10% in the coming weeks.

These declines, according to DAT, have some near-term implications for large carriers that have proactively taken steps to order new trucks in order to keep pace with still-high demand, driven by the ongoing COVID-19 pandemic, with the likelihood that it will leave owner-operators could see their margins get squeezed.

In a recent conversation I had with DAT’s Chief of Analytics Ken Adamo, he highlighted that 2020 finished up on a strong note, from a broker-carrier perspective.

“Spot rates rallied, as you would seasonally expect, and later in the summer there was some conflicting optimism and pessimism about how good the [fall holiday] retail season was going to be,” he said. “I think it was a pretty good season, and once the official numbers come out, it will bolster the idea that e-commerce was strong and more than made up for some of the deficits in brick and mortar. The lines can blur, because a lot of the traditional brick and mortar retailers had a full eight or nine months to prepare essentially and become e-commerce players.”  

Leading up to the holidays, in the third quarter, Adamo explained that one thing that became apparent was a notion that that the extent to which things become oversold, or overbought, as they relate to rates and volume, could “violently correct” in the first quarter, which is what has happened in the first quarter, to date.

What’s more, he said DAT is seeing it occur across two distinct groups.

• Shippers had a lot of RFPs late in the third quarter and throughout the fourth quarter, with those rates now making their way into routing guides, with contract rates and volumes up (but somewhat softer than expected); and
• Carriers are in a more precarious position, in that those exposed to contract carriers are in a good spot, but smaller carriers exposed to the spot market have seen rates up into the double-digits, coupled with higher fuel prices, and declining volumes

Through the week ending January 24, DAT reported in its DAT Trendlines Report that the national average van rate—at $2.40 per mile—is down $0.06 compared to the December average, with flatbed, at $2.48 per mile, up $0.01 compared to the December average, and refrigerated, or reefer, at $2.64 per mile, $0.04 below the December average.

Adamo said that flatbed rates are holding up, adding that based on short-term data there is always a dip around this time of year, for the next few weeks, with some inflationary pressures pertaining to building materials and also housing starts. And should oil continue to rise, he said that could bump up rates as well.  He also noted that things are more segmented and industry-dependent for flatbed compared to dry van.

On the reefer side, he said that there are some concerns. When comparing the current market to 2018, he said that in 2018 there was a significant collapse with the average rate per mile going from $2.35 to $2.07 over the course of 60 days.

“We are [now] trending exactly along that same line but starting at a higher point,” he said. “We came into the year at around $2.50 on a seven-day rolling average. And if things bottom out where 2018 bottomed out, at just north of $2.00 per mile plus fuel, that is a 20% drop.”

Looking at dry van, Adamo there is still some room to run compared to 2018 before concerns could arise, with 10%-to-12% more to go, with an eye on a sharp correction and reading the tea leaves.

“Those are things like railroad surcharges coming off of the West Coast, and increased dwell time to ports,” he said. “If you look at Southern California, the outbound rates have fallen considerably, even over the last 15-to-20 days. These are signs of normalization. It can look like things are crashing, but when in reality we lost sight of where we started.”  

DAT also reported that its van load-to-truck ratio, fell from 3.6 to 3.2 week over week, from the week ending January 17 to the week ending January 24, as less than 1% more trucks were posted, with dry van load-post volume off 12%, driven by seasonality.

“Right now, we are heading into that free-fall period, in terms of what this time of the year means for asset-based carriers, said Adamo. “They are doing their annual ramping of endorsements or maybe temporarily furloughing dock workers or yard workers, because it is slow. What we are most concerned with or interested in is ensuring that we start to see the pickup, whether it is in late February or early or mid-March. The extent to which things slow down, especially on the load-to-truck side, I am not as concerned about over the next six weeks or so. There is a ton of new capacity entering the market, with record numbers of Class 8 truck orders…and they have been bullish for quite a while now. The lower load-to-truck ratio is not a big concern, as it is more due to seasonality and a market readjustment. I will be concerned if we don’t see it respond to signs of life in the spring, when people start shipping their grills and patio furniture and getting their stock on the shelves, as well as produce coming over the border and getting into distribution networks.”

These are things Adamo said DAT gauges to assess the true health of the market through the lens of load-to-truck, or any volume metric, at this time of year.     

While it is fair to say 2020 will be remembered as a year unlike any other, spot market conditions in 2021 will require a watchful eye, for the many reasons outlined by DAT’s Adamo.