The truckload market is approaching its peak, but rates are expected to remain high in the coming months due to ongoing volatile conditions throughout the supply chain, according to a third-quarter market forecast from third-party logistics services (3PL) provider Coyote, released this week.
The company's Coyote Curve index is a quarterly U.S. truckload/less-than-truckload (LTL) market forecast that combines proprietary transaction data with market insights. The Q3 outlook predicts strained market conditions and high costs as companies struggle to keep up with a surging post-Covid-19 economy. Both contract and spot market rates are heading toward record highs and are expected to remain there, the research shows.
“In Q3, we are likely at or near the cycle’s peak, but we won’t be entering a new world of low spot truckload rates and ample capacity,” the researchers wrote in a report released this week. “Contract rates are also heading to record highs. Spot market activity is the largest factor driving contract rate increases, so contract rates are expected to continue trending upwards.”
The Q3 outlook lists six contributing factors to the “chaotic” conditions occurring in the market:
1. Year-over-year comparisons. Last year’s spike in activity due to panic buying and a subsequent drop-off mean that improvements this year appear more extreme.
2. Resurging economy. Strong consumer activity is driving the recovery, but supply chains are struggling to keep up after a year of start-and-stop demand.
3. Suez Canal blockage. The blockage delayed more than 200 ships traveling through this critical corridor, creating a ripple effect of late deliveries on thousands of international shipments.
4. Los Angeles port congestion. Extreme congestion in L.A., and elsewhere, continues to delay businesses that are waiting for product delivery, slowing their ability to manufacture and ship and also creating a domino effect on transportation.
6. DOT Week. The Commercial Vehicle Safety Alliance International Roadcheck (also known as DOT Week), is an annual event that causes a short-term capacity crunch. This year, the international Road Check was from May 4-6.
7. Produce Season. Seasonal produce freight heats up in early spring and causes regional capacity shortages, beginning in Southern Florida and Texas in March and April and spreading north throughout the summer.
For more information, visit the Coyote Curve website.