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Trucking Trends: There's Freight to Move

By Mark Montague, DAT Solutions

December was arguably the strongest month for truckload freight in 2016. So even though we've seen a typical slowdown in January and February, spot-market volumes remain higher than usual in some places for this time of year.

In fact, the January 2017 DAT Truckload Freight Index closed at a level near January 2014, when the Polar Vortex and new hours of service rules helped propel spot freight volume and rates to new records, and January 2015, coming off unprecedented highs in 2014.

The January van load-to-truck ratio was up 76% year over year, reefers up 62%, and flatbeds up 164% over the same time period. An indicator of supply and demand, the load-to-truck ratio measures the number of available loads on the spot market relative to the number of available trucks, and changes usually signals a shift in rates.

Not so in January.

The national average spot rate for vans was up only 1.3% year over year at $1.68 per mile. The reefer rate was $1.96 a mile, just 3.2% higher, while the flatbed rate was $1.91 per mile, up 1.6%.

Why didn't rates keep pace with robust freight volumes?

One reason is that a strong spot market attracted more trucks from contract carriers, and the added capacity helped tamp down rates on a lot of high-traffic van and refrigerated freight lanes.

By mid-February, with spot rates in a seasonal decline, the national average contract van rate had firmed up to the point where it was roughly 25 cents higher than the national average spot line-haul rate. Reefer and flatbed rates also showed a growing gap between contract and spot rates.

This suggests two key takeaways.

One, the beat-down that many large contract

carriers felt in the middle of last year—as shippers took advantage of a capacity "glut"—appears to have abated.

Two, despite only marginal rate increases compared to this time last year, the strength of the spot market means there's good money to be made if the economy shows even modest improvement.

One area to watch: flatbed freight. In January, demand for flatbed trucks rose 18% compared to December. Available capacity rose just 3%.

Flatbed freight is anything that won't fit easily into a box, like building materials and heavy machinery. They indicate activity in construction and especially energy, as drillers take advantage of crude prices that have been mostly over $50 a barrel since OPEC agreed to cut supplies in late November.

In mid-February, the national average spot flatbed rate was $1.96 a mile following four straights week of increases and the flatbed load-to-truck ratio hit 24.6.

It may be early in the year, but there's freight to move.

Mark Montague is industry rate 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. For information, visit www.dat.com.