DC Velocity - March 2013

newsworthy
Spot market loads soared in January, firm says

A consulting company that tracks truckload (TL) volumes tendered on the spot market said U.S. truckload traffic in January soared to levels unseen since the firm began monitoring data in 1996.

Numbers published in mid-February by Portland, Ore.-based DAT, a unit of TransCore, showed “unusual” strength in spot market demand for January. January is historically considered a decent but unspectacular month for freight due in part to inclement weather in many parts of the country.

Truckload volumes, measured in loads tendered, rose 28 percent over January 2012 figures and exceeded December 2012 traffic by

18 percent, DAT said.

Spot market traffic consists of freight posted on load boards by shippers and intermediaries for bidding by carriers.

For the first time since the company began tracking the data, freight availability was higher in January than in December. For the past 10 years, spot freight levels have declined on average by 13 percent between December and the subsequent January. The sequential data from December 2012 to January 2013 were skewed somewhat by a holiday-short-ened December, which had four fewer working days than did January, DAT said.

Compared with January 2012, dry van loads on the spot market rose 36 percent; refrigerated, or “reefer,” volumes jumped 32 percent; and flatbed traffic increased 7. 9 percent. Flatbed demand generally peaks in the summer to coincide with increased warm-weather activity in the construction sector.

Despite the increase in demand, spot market freight rates—excluding fuel surcharges—remained flat to down in January, indicating that capacity has “remained relatively

loose,” DAT said. Rates for dry van services fell 2. 4 percent over December, while flatbed rates fell 2 percent and reefer rates remained relatively stable. Year over year, rates for all three main truckload services declined, with reefer rates showing the steepest drop at 8. 6 percent, according to DAT.

DAT consultants said rates in January were tamped down by additional capacity entering the market from the con-tract-pricing side. Mark Montague, DAT’s industry pricing analyst, said the contract marketplace shrank by 2. 5 percent in January, citing data from Cass Information Systems Inc., a firm that tracks this activity. This has forced more truck capacity into the smaller spot market and has offset the gains in export demand, he said.

However, many carriers have since adjusted their pricing matrixes, meaning that as of last month, truck users were confronting higher line-haul rates and fuel surcharges, DAT said.

Montague said volumes are being driven by

what he termed “extraordinary” demand for U.S. industrial freight exports to Brazil, China, and Mexico. Much of that freight tends to move on the spot market rather than under contract, he said.

RATES ON THE RISE?

The question now is whether the January demand surge will presage higher truckload rates through the rest of the winter and into the spring. There is anecdotal evidence that truck brokers are paying more today for purchased transportation than they have in the past year. John G. Larkin, lead transport analyst for investment firm Stifel, Nicolaus & Co., said in a recent note that brokers are struggling to push up rates to keep pace with their transportation buying costs.

Meanwhile, a monthly index of shippers’ conditions published by consultancy FTR Associates reported a - 4. 9 reading in December, the most recent data FTR had available as DC VELOCITY went to press. Any reading below zero signals tough sledding for shippers as capacity tightens and rates rise.

FTR, based in Bloomington, Ind., predicted the index will be five points lower by mid-summer as demand continues to improve and the federal government begins on July 1 to enforce its new regulations governing a truck driver’s hours of service. Industry observers predict that the rules could reduce driver and rig capacity by 3 to 10 percent, depending on the source of the estimate. The projected drop will take the index close to a level of - 10, which will raise alarm bells for users of truck transportation. ;

—M.S.

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