Spot Freight Market Could Be Looking Up
The collapse of oil prices and the resulting pullback from hydraulic fracturing
operations had a major effect on the spot market.
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The collapse of oil prices and the resulting pullback from hydraulic fracturing
operations had a major effect on the spot market.
“>
If you’ve given up on the truckload spot freight market or have been using it less because of the past year’s depressed rates, it might be time to give it a second look. External pressures that pushed rates down appear to be easing and rates are finally starting to improve — although they still have a way to go before returning to last year’s levels or the record-setting highs of 2014.
That’s according to Mark Montague, industry-pricing analyst with the freight matching and load board services provider DAT Services. In an interview, he said the spot market went to pot in March 2015, with things not showing any real improvement until this spring.
The reasons are some of the same that have caused the economy to sputter along, with one of the biggest being lower oil prices. While cheap crude has led to lower fuel prices, those savings have come with consequences.
“The main driving cause was the oil industry collapse with the end of fracking, the end of moving pipe or steel and all other related commodities, which spilled over into the spot market,” he says. “It took a bite out of flatbed freight first of all, then the next bites were in van freight. On top of that, you had the produce market driven by California going to flop because of the drought.”
With the oil industry throttling back, workers in that sector lost jobs and cut their retail spending, which drives so much of the economy. Energy companies also cut their business investment. Even consumers who were saving money on fuel purchases didn’t see a big enough dividend to go out and spend wildly.
However, something happened in April. Retail sales increased by their largest amount in just over a year, with another solid increase in May. Also in May and extending into June, oil and fuel prices started heading higher. And in early June parts of California even saw improvements in drought conditions.
Coincidentally or not, the DAT North American Freight Index came back to life in the spring. The May level was still below that of the previous four years, but higher than it was in the latter part of 2015.
Montague says flatbed rates have “really stabilized over the last few months,” and at the beginning of May “we began to see an increase in freight on the spot market for van and reefer freight” which can help bump up rates.
However, there are still factors at work that will keep them from going as high as the industry might like. Linehaul rates, the portion of the spot rate that does not include the fuel surcharge, remains lower than a year earlier for a variety of reasons, including a “race to cut rates in the first half of the year” and truck capacity added by large fleets in 2015. Also manufacturing remains weak, despite some recent improvements in total activity.
Despite these challenges, even one mega-fleet that traditionally relies little on the spot market is turning to it. Swift Transportation announced in June its “spot market participation has increased somewhat” due to the lack of available freight in certain markets.
The benefit, according to Richard Stocking, president and chief operating officer, is it will “keep our trucks moving”.
So while the spot market may not be your favorite place to get freight, it’s better than it has been. More importantly, it beats the alternative of having your trucks sit, generating zero revenue.
Related: The Inventory Thorn in Trucking’s Side
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