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TO APPRECIATE THE SIGNIFICANCE OF THE CURrent truckload rate environment, all one need do is listen to the historical commentary. When the cycle began about a year ago, folks compared it with the winter 2013–14 spike during the so-called “polar vortex.” As it continued, comparisons were being drawn to the 2003–04 period when rates zoomed higher due to changes in the driver hours-of-service regulations, a strong economy, and, in particular, a boom in housing demand that would prove disastrously unsustainable.

Now, as the current cycle increases in duration and intensity, folks are traveling further back in time to create parallels. Veteran analyst Donald Broughton said this cycle has produced the strongest “ normalized level” of truckload pricing since the trucking industry was deregulated in 1980. Normalized pricing excludes extreme periods of recovery coming out of a recession. Executives at DAT Solutions LLC, a provider of loadboard data for the spot, or non-contract, market, have arrived at the same conclusion.

Broughton has forecast 2018 contract rate increases to range between 6 and 12 percent, with the risks to his prediction skewing to the upside. The spring contract bidding process ended recently with rate increases averaging anywhere from 6 to 10 percent. In June, which was one of the strongest months in years, contract rates soared 17 percent from the same period in 2017.

The catalyst behind the surge appears to be the one part
that had gone missing: demand. For years, more than a few
observers have warned that drum-tight supply conditions
only needed better-than-decent demand to trigger the
situation that exists today. Stronger demand has certainly
arrived. J.B. Hunt Transport Services Inc., the Lowell, Ark.-
based transport giant, posted second-quarter results that,
for the first time in at least four years, beat analyst estimates
across all of Hunt’s product lines, according to Bascome
Majors, transport analyst for Susquehanna Financial Group,
an investment firm. Data released in mid-June by audit and
freight payment specialist Cass Information Systems Inc.
showed that U.S. shipments across the board jumped 11. 5
percent in May from the prior-year period and that freight
spending surged 17. 3 percent year over year (June data was
not yet available at this writing). What made the May data
so extraordinary is that it had a tough comparison off fairly
strong numbers around the same period in 2017, Cass said.
Most of the supply-demand
imbalance has manifested itself
in the spot market, where rates
for dry van equipment—the most
common type of truckload trail-
er—touched $2.45 a mile for the
week ending July 7, which was an
all-time record. In June, spot van
rates rose 52 cents per mile from
the same period in 2017. Spot rates
for flatbed and refrigerated, or
reefer, equipment were also posi-
tioned at all-time highs, though
flatbed rates remained unchanged
from the prior week, according to
DAT data. Rates have since backed off somewhat as more
capacity enters the market.
Craig Fuller, head of Freightwaves, a logistics data and
analytics provider, and the second-generation of the family
that co-founded truckload carrier U.S. Xpress Enterprises
Inc., said spot rates have soared because there isn’t enough
capacity to accommodate all of the additional freight. Spot
rate increases have actually paused recently due to more
owner-operators entering the market, Fuller said. By con-
trast, contract rates have begun to catch up because the bulk
of that business is handled by the larger fleets, which are
having the most trouble finding qualified drivers, he said.

Fuller expects spot rates, which are still showing upward pressure but not real volatility, to gather steam again before too long.

The current cycle will not continue into perpetuity. Yet no one is expecting it to turn before year’s end, and analysts like Majors of Susquehanna are already sticking their necks out to project that 2019 has a good chance of looking like 2018.