The U.S. truckload spot market has found itself so far this year in the same doldrums where it spent most of 2015, a trend that, unless reversed, will put shippers in the familiar position of calling the pricing shots and motor carriers in the familiar position of taking them.
The spot, or noncontractual, market was weak during virtually all of last year, spiking upward meaningfully on a month-over-month basis only in December. Some chalked up the weakness to the markets reverting to the mean following an extraordinary 2014, when bad winter weather in that year's first quarter shut down capacity, sent spot rates soaring to record highs, and kept them elevated for quarters to follow.
But as the calendar has turned, the comparisons with 2014 have grown stale. After rising at the immediate turn of 2016, spot market load-to-truck ratios—the ratio of the number of loads per available truck—and spot rates slid across the board in the week ending Jan. 16, DAT Solutions, a consultancy that operates one of the nation's largest load board networks, said in a report late Wednesday. In the dry-van segment, load posts fell 21 percent from the week ending Jan. 9, while the number of available trucks rose 29 percent, according to DAT. This caused load-to-truck ratios to drop by 38 percent, DAT said.
The national average van rate fell 5 cents from the prior week to $1.68 per mile, which included a 1-cent decline in the average fuel surcharge, triggered by declining oil and fuel prices, DAT said. Spot rates are quoted to shippers on an "all-in" basis, which combines the base rate and prevailing fuel surcharge.
The refrigerated and flatbed spot markets didn't fare much better. "Reefer" load posts dropped 26 percent from the prior week, while truck posts jumped 22 percent, resulting a 39-percent fall in the load-to-truck ratio. The national average reefer rate dropped 6 cents, to $1.90 per mile, which included a 1-cent drop in the fuel surcharge. Flatbed loads held steady but available capacity increased 27 percent, resulting in a 21-percent decline in the load-to-truck ratio, DAT said. Average flatbed rates edged 2 cents down, to $1.90 per mile.
The DAT numbers come less than a week after investment firm Avondale Partners and audit and payment concern Cass Information Systems published their monthly truckload line-haul index, a measure of changes in per-mile line-haul rates that exclude fuel surcharges and accessorial fees. That data showed a scant 1.1-percent increase in December from year-earlier levels. This followed gains in October and November of 1.9 percent and 1.6 percent, respectively, the firms said.
What's more, spot rates decreased last month to levels not seen since 2009, a bothersome sign for contract pricing since spot market prices generally lead contract pricing, which accounts for as much as three-quarters of the enormous U.S. truckload market.
Avondale has forecast average contract rate increases this year of between 1and 3 percent, well below what carriers may have been expecting during most of 2015, when contract rates did the unusual and rose as spot rates fell. In what could turn out to be an understatement, Avondale said that "current spot market weakness have lasted long enough to begin to be troubling." Ben Cubitt, senior vice president of consulting and engineering for Transplace, a large third-party logistics (3PL) provider based in Frisco, Texas, agreed that shippers can now negotiate favorable rates. However, Cubitt said the current climate will likely not last forever, and any user that tries to kick a carrier when it's down will do so at its own peril.
Much has been made of the slowdown in the macroeconomy, which has hit end demand. Most of the decline has been felt in the industrial sector, normally the province of less-than-truckload (LTL) carriers. But retail did not burn the barn over the holidays, and that could be affecting truckload carriers as well. Another culprit in the drop in spot rates is the extraordinary decline in diesel prices, mirroring the sharp fall in oil prices. On Tuesday, the Energy Information Administration (EIA) said in its weekly report that average on-highway national diesel prices dropped 7 cents a gallon, to $2.11 per gallon, the lowest national average price since the worst of the Great Recession in March 2009. The price declines caused fuel surcharges, which are mostly pegged to the EIA data, to be adjusted downward, leading in part to the fall in spot rates.
A third factor could be the current relative abundance in capacity, defying the multiyear projections of shrinkage in rigs and drivers. Net new orders—new orders minus cancellations—of heavy-duty "class 8" tractors hit 28,150 units in December, the best monthly numbers for an otherwise subpar year since February, according to consultancy ACT Research. The big winners were dual-driver "sleeper" tractors, which had their best production and order year ever, ACT said. Trailer deliveries also set a record in 2015, ACT said.
December orders are generally placed by big truckers looking to get their replacement requirements in order ahead of the new year, according to Kenny Vieth, ACT's president. The deliveries will be spread evenly throughout the four quarters, he said in an e-mail yesterday
But the year-end buying binge may be the last feast for a while, according to ACT. "With excess freight-hauling capacity and slowing freight growth, freight rates have softened to the point where many truckers are now taking a wait-and-see approach before committing to more new equipment," Steve Tam, ACT's vice president, commercial vehicle sector, said in a statement that accompanied the final December tractor net-order figures.
In an interesting twist, Peggy Dorf, a market analyst for DAT, said that truckers may have used their significant savings from the decline in fuel prices to invest in new rigs. The firm did not immediately show data to support that claim, however.
As for drivers, the wild card may be how many—if any—oilfield workers who may have been laid off in the wake of the decline in domestic shale-oil and gas drilling activity choose to transition into the trucking sector, which is still looking at a significant shortage of qualified drivers in the next few years.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.