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By Mark Montague, DAT Solutions
In the first half of the year, the spot truckload freight market in Texas was bubbling over. Flatbed load-to-truck ratios in the state were in the triple digits, meaning there were more than 100 loads for every available truck on the spot market.
To say there weren't nearly enough trucks to cover the demand from shippers would be an understatement.
But by the end of July, the freight market in Texas began to cool. It wasn't unexpected—we usually see a slump in freight toward the end of the summer in most parts of the country—but this year, Texas fell more than most.
By October, the flatbed load-to-truck ratio in the state was in the teens.
What happened?
For one thing, we've seen a significant increase in available capacity on the spot market, especially among small and mid-sized carriers. Enticed by a strong, stable rate environment, they've brought trucks back into the marketplace—and the marketplace back into balance.
Another factor involves electronic logging devices, or ELDs. A Teletrac Navman survey of 2,400 trucking professionals shows that 64% of fleets are using ELDs, although personally I think that may be low. Carriers, drivers, and the enforcement community continue to adjust to the mandate but the productivity losses and additional costs of operation are more or less baked into the freight environment now. At this time last year many of the small and mid-sized flatbed carriers that serve Texas oil suppliers were still uncertain about whether they would comply.
Finally, pipeline issues in West Texas are also part of the equation.
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Nationally, spot truckload rates have been slumping since the summer but remain stable. They're tracking 20% higher compared to last year.
Drilling in the Permian Basin around Midland, Texas, slowed and demand cooled out of Houston, the largest flatbed market in the country and the top market supplying Midland and its surrounding counties. Regional van markets like Dallas and Memphis—which distribute a wide range of freight to Houston—seem to have been affected by the slowdown in oil drilling as well.
Looking ahead, new pipeline projects are underway to expand capacity for all the completed wells. One issue these projects face is sourcing steel domestically due to the new steel tariffs. Some claim that the steel isn't readily available or costs much more than imported steel prior to tariffs.
It's yet to be seen whether domestic activity elsewhere will balance out any slowdowns in West Texas. Even if volume increases in the fourth quarter, year-over-year gains may be muted due to the strength of comparable months in 2017. Watch this space for updates.
Mark Montague is senior industry pricing analyst for DAT Solutions, which operates the DAT® network of load boards and RateView rate-analysis tool. He has applied his expertise to logistics, rates, and routing for more than 30 years. Mark is based in Portland, Ore.
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