Year-end surge leaves dry van spot truckload rates at highest levels since 2009, consultancy says

Spot market rates for dry van services, the most widely used form of truckload delivery, spiked at the end of 2013 to near-historic levels, according to truck consultancy DAT.

As of the week ending Dec. 28, average spot rates hit $1.95 a mile, according to data from DAT, a Portland, Ore.-based concern that analyzes trends in truckload pricing. That was the highest weekly level DAT has recorded since it began tracking spot rates in 2009.

The year-end rate levels are unprecedented in that they were reached during what is normally a quiet seasonal period for demand, said Mark Montague, DAT's senior rate analyst, who has worked in the field for decades. Even after volumes tapered somewhat after Thanksgiving, rates continued to climb, he said. The spot rate calculations include the cost of fuel surcharges imposed by carriers.

The average dry van spot rates ended the year 22 cents a mile higher than they began, according to DAT's numbers. That represents a near 23-percent jump from the average levels DAT reported for 2012.

Spot rates for refrigerated and flatbed traffic also picked up strength as the year ended, according to DAT. In the last full week of 2013, the average flatbed rate stood at $2.15 a mile, a 4-cent increase from the prior week. Rates for refrigerated traffic climbed 3 cents to $2.12 per mile. For the year, "reefer" rates increased over 2012 levels. Flatbed rates, however, declined year-over-year.

SECOND-HALF SURGE
The recent surge in dry van spot rates took root in the last two months of 2013. From May to October, rates oscillated between $1.80 and $1.84 per mile. In November, though, rates jumped to $1.87 a mile. That was followed by the increase in December. On balance, the 2013 rate story was told in the year's second half, with van rates rising in July, instead of dropping, and never looking back, Montague said.

Montague chalked up about two-thirds of the year-end increase to broad improvement in the economy and, by extension, freight demand. The remaining one-third was related to more seasonal factors such as a pickup in construction activity during what is normally a slow period, a pull-forward in ordering by users of raw materials ahead of expected 2014 commodity price increases, and bad weather in the Southwest, notably a nasty ice storm in early December in the Dallas/Ft. Worth metropolis that sidelined capacity in that key market for several days, he said.

Carriers benefited throughout 2013 from strong growth in energy and automotive production, Montague said. They also reaped the gains from a late-year surge in potato traffic as well as increases in meat production, he added.

The federal government's new regulations governing a driver's hours of operation, which were enforced starting July 1, affected driver and truck productivity by about 3 percent by, among other things, cutting a driver's available workweek by 15 percent, Montague said. Overall, though, truck capacity was not critically tight throughout the year except in sporadic cases, he said.

TO BE CONTINUED?
Montague declined to forecast whether the rate momentum would extend into the first quarter or first half of 2014. He said, however, that the favorable macroeconomic trends that surfaced in the second half of 2013 show no signs of abating. "The economy is in a good spot," Montague said in a phone interview yesterday.

Spot market rates, if sustained, will often have an impact on the outlook for contract rates. Generally, spot rates lead the contract rate market by two to three months, Montague said.

Traditionally, the spot market has accounted for 15 to 20 percent of the overall truckload rate universe. However, Montague said he believes that spot rates actually represent a larger percentage of the total market. DAT has launched an effort to quantify the relevance of spot rates on the broad truckload rate landscape, he said.