Spot market loads soared in January, firm says

A consulting company that tracks truckload (TL) volumes tendered on the spot market said U.S. truckload traffic in January soared to near-unprecedented levels in the 17-year history of the index.

The data, published late last week by Portland, Ore.-based DAT, a unit of TransCore, showed "unusual" strength in spot-market demand for January. January is historically considered a decent but unspectacular month for freight due in part to inclement weather in many parts of the country. Truckload volumes, measured in loads tendered, rose 28 percent over January 2012 figures and exceeded December 2012 traffic by 18 percent, DAT said.

For the first time since the company began monitoring the data in 1996, freight availability was higher in January than in December. For the past 10 years, spot freight levels have declined on average by 13 percent between December and the subsequent January. The sequential data from December 2012 to January 2013 was skewed somewhat by a holiday-shortened December, which had four fewer working days than January did, DAT said.

Compared to January 2012, dry van loads on the spot market rose 36 percent, refrigerated, or "reefer," volumes jumped 32 percent, and flatbed traffic increased 7.9 percent. Flatbed demand generally peaks in the summer to coincide with increased warm-weather activity in the construction sector.

Spot market traffic consists of freight posted on load boards by shippers and intermediaries for bidding by carriers.

Despite the increase in demand, spot market freight rates—excluding fuel surcharges—remained flat to down in January, indicating that capacity has "remained relatively loose," DAT said. Rates for dry van services fell 2.4 percent over December, while flatbed rates fell 2 percent and reefer rates remained relatively stable.

Year-over-year, rates for all three main truckload services declined, with reefer rates showing the steepest drop at 8.6 percent, according to DAT.

Bradley S. Jacobs, chairman and CEO of XPO Logistics Inc., a Greenwich, Conn.-based truck broker, freight forwarder, and expedited transport provider, said in an interview last week that XPO is having no trouble procuring capacity at good rates for its shipper customers.

The one exception, Jacobs said, was during the clean-up period in November after mega-storm Sandy, when truck supply was tight for the affected areas of the Northeast. Other than that, he said, "the load boards are pretty much cleaned up by noon," meaning loads are quickly being matched with carriers.

DAT said the post-Sandy impact had dissipated by early December and had a negligible impact on its readings.

DAT analysts said current spot market supply and demand is roughly in equilibrium. Mark Montague, DAT's industry pricing analyst, said volumes are being driven by what he termed "extraordinary" demand for U.S. industrial freight exports to Brazil, China, and Mexico. Much of that freight tends to move on the spot market rather than under contract, Montague said.

At the same time though, Montague said the contract marketplace shrank by 2.5 percent in January, citing data from Cass Information Systems Inc., a firm that tracks this activity. This has forced more truck capacity into the smaller spot market and has offset the gains in export demand, he said.

The question now is whether the January demand surge will presage higher truckload rates through the rest of winter and into the spring. There is anecdotal evidence that truck brokers are paying more today for purchased transportation than they have in the past year. John G. Larkin, lead transport analyst for investment firm Stifel, Nicolaus & Co., said in a research note last week that brokers are struggling to push up rates to keep pace with their transportation buying costs.

Meanwhile, a monthly index of shippers' conditions published by consultancy FTR Associates reported a -4.9 reading in December, the most recent data FTR has available. Any reading below zero signals a tough environment for shippers due to tightening rig and driver capacity and the higher rates that accompany that environment.

FTR, based in Bloomington, Ind., predicted the index will be five points lower by mid-summer as demand continues to improve and the federal government begins on July 1 to enforce its new regulations governing a driver's hours of service. Industry observers predict that the rules could reduce driver and rig capacity by 3 to 10 percent, depending on the source of the estimate.

That drop in the FTR index will take it close to a level of -10, which indicates a "critical" environment for users of truck transportation.

DAT consultants said although rates in January were tamped down by additional capacity entering the market, many carriers have since adjusted their pricing matrixes. That means users in February are confronting higher linehaul rates as well as increased fuel surcharges, DAT said.