As spot rates stay low, shippers hold off on contracts

Dive Brief:

Trucking demand, measured by DAT's load-to-truck ratio, was down more than 25% year-over-year (YoY) for vans, down more than 30% for flatbeds and down 25% for reefers in July. DAT's numbers show that spot loads were down almost 18% in September, but spot truck postings were up more than 9%.
The latest reports from Cass and the American Trucking Association (ATA) similarly show their indexes slid in August. For Cass, this marked the ninth straight month of decline.
Spot rates were also lower than a year ago in September, according to DAT. Spot rates for vans were down almost 14% YoY, flatbed rates were down more than 14% and reefer rates were down almost 14%, according to DAT data.

Dive Insight:

Continually slipping prices in the spot market have drawn more shippers away from contracts as the gap between the two markets shrinks, Cass noted.

Tim Denoyer, the vice president and senior analyst at ACT Research, recently told Supply Chain Dive they advised shippers to wait on signing contracts while rates were low.

"The weakness in spot market pricing for many transportation services, especially trucking, is consistent with the negative Cass Shipments Index and, along with airfreight and railroad volume data, strengthens our concerns about the economy and the risk of ongoing trade policy disputes," Cass wrote in its report.

ATA's tonnage index fell 3.2% in August after showing signs of life in July. "It is important to note that ATA’s tonnage data is dominated by contract freight, which is performing significantly better than the plunge in spot market freight this year," ATA Chief Economist Bob Costello said in a statement.

Spot postings did start to show improvement toward the end of September with postings jumping nearly 29% in the last week of the month compared to the week prior, DAT's numbers show.

"The spot market recovered the 25% loss in volume during the previous week when Tropical Storm Imelda disrupted supply chains in the Houston area and other regions across the Southeast and Midwest," DAT said in a press release emailed to Supply Chain Dive. "The number of truck posts increased 19%, reversing a 17% decline the previous week."

This market may be good for shippers, who get their choice of a contract or a low spot market, but trucking companies continue to struggle. The news this week that Roadrunner Transportation Systems would downsize its dry van business and layoff 450 workers shows that even the larger players are feeling the squeeze.