Rising US truck spot rates likely to flatten in early July: DAT

Rising US truck spot rates likely to flatten in early July: DAT

Truck rates rose rapidly in early June but are approaching a “plateau,” DAT Solutions said. Photo credit: Shutterstock.com.

Business reopenings and produce harvests are pumping more freight into the US truckload spot market, raising spot rates from low points hit in April and May. However, that does not necessarily signal a ‘V-shaped’ recovery from the recession. Spot rates are likely to flatten or drop in seasonal fashion after the Fourth of July holiday, said Ken Adamo, chief of analytics at DAT Solutions.

“I do think our modeling is bearing out that the spot market should slow down considerably post-Fourth of July,” Adamo told JOC.com Tuesday. June typically is the busiest month of the second quarter for truckers and the height of the spring and summer retail season. Freight volumes typically are soft in July and the “dog days” of August, Adamo pointed out.

DAT’s average US dry-van wholesale spot rate, including fuel surcharges, rose 3.4 percent in the week ended June 14 from the first week of June. The average dry-van wholesale spot rate for the month to date is $1.75 per mile, a 9.4 percent gain compared with the $1.60 per mile average for May, but still 6.4 percent below the average rate of $1.87 per mile DAT reported for March. 

An analysis of all-in shipper retail rate quotes for top US freight lanes provided by digital broker Loadsmart shows pricing moving in a similar direction, with the average mean price jumping more than 10 percent in early June from May, and then increasing an additional 1.2 percent by Tuesday. The average for the month to date of $1.85 per mile compares with $1.64 per mile in May.

Spot shipments posted on DAT’s load boards were up 6.5 percent week over week, and the dry-van load-to-truck ratio rose to 4.6, meaning there were 4.6 available loads for each truck. The ratio for May was 3.3, and for April 2.2. In the second week of June a year ago, the ratio was 5.9, according to DAT. That shows volumes still are down 22 percent year over year.

Cass index shows incremental gains

The spot market volume increase is unfolding against a backdrop of incremental freight gains as states across the US continue to reopen for business amid the continuing COVID-19 pandemic. The Cass Freight Shipments Index for May rose 1.6 percent from April, Cass Information Systems said Monday. The Cass Freight Expenditures Index dropped 5.7 percent from April.

“We were surprised not to see more of an uptick; the reopening schedule appears to have unfolded slower than we anticipated,” David G. Ross, managing director and group head of global transportation and logistics equity research at Stifel, said in his report on the Cass Freight Index. “We do not believe we will reach 2019 freight activity levels until 2021.”

This summer will test smaller trucking companies and owner-operators, Adamo said. “We will have the capacity to see us through the rest of this peak. The question is what happens to these small and mid-sized carriers once government support goes away,” he added, referring to the Paycheck Protection Program (PPP) established by COVID-19 relief legislation.

Companies have until June 30 to apply for PPP loans, with $129.8 billion in funding remaining. The US Small Business Administration had approved 4.6 million loans worth $512.3 billion by June 12. Transportation and warehousing businesses, including motor carriers, accounted for 161,794 PPP loans valued at $16.4 billion, 3.2 percent of the total dollar amount. 

Adamo said the full economic brunt of the COVID-19 recession may not hit trucking operators until this summer. “We’ll have to see what happens when the dust settles and these carriers are exposed to the new normal,” he added. “They’ll have to bridge the gap of the next three months, until the holiday retail season. If enough capacity exits, we could see tightening in the fourth quarter.”

Although there is sure to be a spike in the fourth quarter, he said, the outcome for shippers and carriers depends on how much money consumers will be willing to spend. “One thing that may drive freight in July and August is fewer people taking vacations and spending more money at home,” Adamo said. “That will drive more consumer packaged goods spending.”

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @willbcassidy.