|
By Mark Montague, DAT Solutions
Truckload volumes have been solid this year but spot market rates have fallen well short of the heights set in 2018. In fact, they've declined steadily since June 2018, as capacity returned to the spot market following the ELD mandate and fleets invested in new trucks.
Contract freight rates are a different story.
For the first half of 2019, contract rates were 3% higher than during the same period in 2018. Contract reefer rates increased the most, followed by vans and then flatbeds. What will the second half of 2019 bring?
Contract rates typically follow spot market trends and, as we near the end of July, spot rates are in a seasonal retreat. In fact, spot van rates are now price-competitive with domestic rail intermodal when you compare a 53-foot van trailer to a shipping container of the same size.
By the end of 2019, I expect contract rates to stabilize at last year's levels as shippers press for lower prices in the upcoming procurement cycle.
Concerns for second half of 2019
There are reasons for concern about freight rates and volumes in the second half of 2019.
Continued uncertainty surrounding trade, especially with China, has many shippers working to replace key suppliers and customers or to retain them at tariff-inflated prices. The push to move goods in order to beat tariffs has, in some cases, affected production and shipping schedules.
The flatbed segment is softer than it was in 2018, despite higher contract rates. Flatbed traffic is a
|
bellwether for all freight transportation because it's tied to industries like energy and construction, which generate a lot of loads. The lull in flatbeds, due in part to a slower pace in oilfield investment in Texas, is causing some analysts to turn bearish on truckload freight.
Year-over-year comparisons will be tough for anyone looking at contract rates, as pricing rose sharply in the third and fourth quarters of 2018 while spot rates actually went in the other direction. They increased from the second half of 2017 through early July 2018 and have fallen progressively lower in each consecutive month.
There are other wild cards, like full ELD mandate taking effect in December 2019, and the weather has been a huge factor. Severe storms and flooding closed down highways, ruined crops, and disrupted supply chains across the continent this year.
The next six months could be equally difficult, as hurricane season kicks into high gear.
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.
|
