At last, after months of “bouncing along the bottom,” the various forecasters and analysts are providing a bit of better news about the prospects for freight volumes and rates in the months to come.
Caution is recommended, however, as those same analysts are advising that those improvements will be slow. Like returning a punt from your own 2-yard line, there’s a lot of distance to cover before putting points on the scoreboard.
DAT Freight and Analytics, which operates the DAT One online freight marketplace and DAT iQ data analytics service, recently reported good news in the gap between spot and contract rates.
Typically, spot rates react to market pressures much faster than contract rates, which lock in rates for a particular time period. When the market is moving rapidly, either up or down, the gap between spot and contract rates grows larger. When the market is stabilizing, the gap is smaller.
“The price to move van freight under contract hit its lowest point in nearly three years,” noted Ken Adamo, chief of analytics for DAT in a Jan. 17 release. “Entering 2024, shippers are in a strong position as they negotiate contract rates, and carriers on the spot market have some optimism that the market will turn.”
On the DAT Trendlines page, spot load postings declined 23.3% in December2023 from November 2023 and were down 57.2% from December 2022. Van spot rates, however, rose 1.6% from November average rates. Both refrigerated and flatbed rates declined 0.7%, and both were well below rates of a year ago.
Now, just past the midpoint of January 2024, both dry van and refrigerated rates are up from December.
“Spending continues to remain solid. We see growth we’re at record levels in both services and goods in spending,” said Avery Vice, vice president of trucking for FTR Transportation Intelligence in a Jan. 11 web presentation. “What we see is a dramatically larger amount of money that is in the system right now, to support consumption than we thought.”
While Vise explained that the economy will likely achieve modest growth this year, the “elephant in the room” is truckload capacity. There are simply too many trucks to haul the available freight. Those numbers, however, are shifting. Truck sales are falling farther behind the corresponding month a year earlier. At the same time, for-hire revocations of authority have been setting records as carriers leave the market.
FTR forecasts that trucking spot rates will trend upwards through 2024 but will do so gradually.
The Cass Freight Index for December showed a 2.1% increase in shipments when adjusted for seasonality, while the amount of spend for those shipments increased a tick. The report, which is written by ACT Research’s vice president and senior analyst Tim Denoyer, noted, “The acceleration in real disposable incomes, supported by a surprisingly sharp disinflation, and the ongoing strong labor market suggest freight demand fundamentals will improve in 2024.”
ACT Research released a report Jan. 18 entitled “Freight Cycle Poised to Enter New Stage in 2024.” In it, Denoyer wrote, “The new year begins with global shipping in turmoil, import freight shifting from East to West, and for-hire demand on the long side of a two-plus-year downturn. Changing ocean and inventory dynamics support an upturn in freight demand.”
The “global shipping turmoil” comes from two intermodal lane routing “pinch points” — the Panama and Suez canals. In Panama, drought conditions have lowered the level of inland lakes to a point where water to operate the locks is limited. In addition, a growing population depends on Panama’s lakes for its water supply, and the recent widening of the canal to accommodate larger ships may use more water as well. The Canal Authority is limiting the number of ships allowed to transverse the canal, creating long waiting periods.
On the other side of the globe, the Suez Canal is being impacted by the turmoil in the Middle East. Houthi rebels in Yemen, sympathetic to Hamas, have been attacking ships in the Red Sea, including intermodal shipping vessels. U.S. and British bombardment of Houthi positions have, to date, failed to halt the attacks.
Shipping lines have announced that ships will be rerouted to avoid both canals. The result can impact trucking by sending ships to alternate ports, creating opportunities for loads in some areas while taking them away in others.
The January report from Motive, which measures visits to retailer’s warehouses using GPS information received from fleets’ in-cab systems, predicted that 2024 will be “less volatile.” The Motive report also remarked that the trucking market continued to contract in December, pointing to high levels of carrier exits (authority revocations) and the low number of new carrier registrations.
Market contraction is good for rates. As the number of available trucks becomes smaller, there is more competition for available freight, driving rates upward.
A potential sticking point, however, may be “deflation.” With higher interest rates helping to slow inflation, the opposite can occur. As consumers spend less, there is less need to restock inventories, reducing the number of available shipments.
The Motive report was less positive than some of the others.
“Our data suggests that 2024’s freight market will continue to be depressed compared to the previous 24-month cycle. However, we also see signs that the market may stabilize in the second half of the year,” the release read.
Beleaguered truckers have struggled to remain profitable during the poor market and won’t find any significant relief in the coming months, but any improvement in rates and freight availability will be welcomed. Diesel fuel costs have been stable, helping keep operating costs down.
As capacity continues to shrink, rates should continue moving upward, despite the increases being small. Better days could be ahead for those who can hold out.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.