Since Labor Day, spot prices for the three main equipment types of dry van, refrigerated (reefer), and flatbed cargoes have been slowly falling. The decreases have been minor, with the all-inclusive rates for chilled goods reducing the highest (4%) and van and flatbed freight falling just over 1%. A quick jump in fuel prices may be hiding a more severe decrease, as noted in last week’s chart of the week. Has the market reached its usual top earlier than expected?
In terms of tender volumes, there has been little to no change in freight demand over the last eight months. When the rejected tenders are removed from the national index, the accepted volumes indicate a tiny rise (0.09 percent) since September 1, indicating that more freight is moving at contracted prices.
Because more loads are traveling under contract, less freight is available on the spot market, forcing carriers to decrease their rates in situations where they rely on transactional freight to keep their trucks moving. The primary point is that demand has remained stable in recent months, with shippers spending less on the spot market and more on the contracted side.
Contract rate hikes have done little to reduce growing spot rates up to this time. When it comes to van contract rates, some shippers raised their prices significantly around Labor Day, which has significantly impacted spot rate rise. The main question is how these contract rate increases would affect shipping throughout the forthcoming holiday season.
Spot rates have increased directly around or leading up to the six major national holidays, according to historical seasonal patterns that have remained over the past year. Temporary supply-side contractions as cars exit the road are mostly to blame for the rate increase.
The pattern of holiday spot rate increases is evident, and they will undoubtedly occur around Thanksgiving and Christmas when more drivers take time off than at any other time of year and shipper service requirements skyrocket. However, not all lanes will be affected in the same way.
Rates from Chicago to Los Angeles peaked about $1.77 per mile in the middle of October, according to FreightWaves’ newly published Market Dashboard tool, and have been declining since.
For goods traveling in the opposite direction, rates have continued to rise at a considerably greater rate, currently $3.49 per mile. Even if aggregate rates have reduced, rates are still being pushed upward by loads moving from highly imbalanced locations.
On reasonably balanced lanes like Atlanta to Chicago, where capacity and demand circumstances are similar on both ends, contract prices appear to have had a significant impact. Since October 24, spot rates have dropped by 20 cents per mile.
In the current context, the drop in spot rates may be startling, but it is not a hint that the holiday season would be sluggish. The market remains highly imbalanced, and the unseen hand of contract rate hikes is providing a floor for any price easing that may occur after the holidays.
The Chart of the Week’s Background
The FreightWaves Chart of the Week is a SONAR chart that highlights an intriguing data point about the health of the freight markets. On SONAR, a chart is selected from thousands of possible charts to assist players in visualizing the freight market in real-time. Every week, a Market Expert will present a live chat on the front page with commentary. After then, FreightWaves.com will store the Chart of the Week for future reference.
SONAR collects data from hundreds of sources and displays it in charts and maps, as well as offering real-time commentary on what freight market specialists want to know about the sector.
Each week, the FreightWaves data science and product teams release new data sets and improve the customer experience.
