Freight rates swell ahead of Hurricane Florence

Dive Brief:

Spot rates in the trucking market rose in the first week of September due to pent up demand from the Labor Day holiday and increased load board activity, as the Federal Emergency Management Agency (FEMA) responded to the threat of Hurricane Florence, according to a weekly analysis by DAT.
After several weeks of declines, the national average of spot van rates rose 6 cents to $2.20/mile, while reefer rates rose 8 cents to $2.57/mile, compared to the previous week. The data is based on the DAT network of load boards, which manage an average of 993,000 posts per business day.
In the first few days of this week, "national average rates moderated somewhat ... dropping 2 cents per mile for each equipment type," Peggy Dorf, an analyst at DAT, told Supply Chain Dive via e-mail. Still, for September, "we expect rates to remain above the August average."

Spot Truckload Rates: 4-Week Trendlines — DAT Trendlines

Dive Insight:

"Typically, freight transportation goes through 3 stages before, during and after a big storm," said Dorf.

Before the storm: A "flurry" of transportation activity, dominated by outbound freight from the affected area. Just outside the storm zone, markets see more inbound freight as FEMA stages emergency supplies in trailer yards and warehouses.
During the storm: "Nothing moves in or out until the storm abates and the roads are clear," said Dorf.
After the storm: Water, food and emergency supplies are trucked into the affected area first, in dry and refrigerated van loads. Flatbeds follow, with construction equipment and materials. Rates rise on inbound loads, due to hazardous road conditions and uncertain delivery times.

Hurricane Florence, a Category 4 storm, is expected to reach the East Coast on Thursday or Friday. It's impact on supply chains will depend on where it strikes, how far inland it travels, and where flooding events occur.

"If there is extensive flooding in the area, as there was during Hurricane Harvey, the disruption could cause rates to remain elevated for weeks. If the damage is confined to the coastal areas, the supply chain impact of Florence will likely be less severe than Harvey, because while Houston is an important regional hub, the major Southeast regional hubs — Atlanta, Charlotte, Memphis — are not in Florence's path," said Dorf.

However, the extent to which the hurricane diverts sea and rail traffic could still elevate rates in those markets. If a storm affects a port so severely ships cannot dock, the containers must still be unloaded, stored and transported from a new port, adding to logistics costs. High flooding could also divert rail traffic.

In the meantime, however, activity is focused on securing cargo and emergency supply staging areas. Dorf said they have heard "anecdotal evidence of staging areas in Maryland, Northern Virginia, and Delaware."