shortage is the primary cause of the spot market’s rise. There just aren’t enough drivers to carry all the available loads, and that forces shippers to move to the spot market. And while the driver shortage is worsening, Broughton said it’s nothing new. “It always will be the case until
they allow autonomous trucks,” he said.
WHAT GOES UP MUST COME DOWN The long-term trend is toward more
contract freight, said Montague. About a year ago, spot market rates for carri- ers were higher than contract rates on roughly 50 percent of the 65,000 lanes DAT tracks. Coming out of the 2009-12 recession years, contract rates were too low for carriers to justify growing their tractor fleets, and drivers were hard to find. It wasn’t until 2014 that rates increased to the point that contract car- riers started to add equipment. Demand for the spot market lessened as a result. DAT’s Montague and Harper said
the spot marketplace underwent a long slide downward this summer, which was counter to the contract market- place, which has seen a steady increase in rates since January. According to DAT, volume year-to-date in August 2015 vs. August 2014 was down 42 per- cent, while capacity was up 32 percent. Spot rates fell in August – most
significantly in the flatbed sector, which saw a drop from $2.15 per mile in the week of August 8 to $2.06 per mile Aug. 29. Rates fell much less in the refriger- ated (from $2.05 to $2.03 per mile) and in the dryvan ($1.79 to $1.75 per mile) sectors. By the second week of September, rates were up to $1.77 in the dryvan sector and had risen slightly to $2.04 in the refrigerated sector but had fallen to $2.03 among flatbeds. The drops occurred despite an increase in average load-to-truck ratios across all three equipment types. Part of the decreased growth in the
spot market is related to the old adage, “What goes up must come down.” It would have been very difficult for the spot marketplace to improve on last
ARKANSAS TRUCKING REPORT | Issue 5 2015
“I’M VERY SURPRISED AT THE NUMBER OF SHIPPERS I’VE SPOKEN WITH THAT TOLD ME THEY ARE
CONCERNED ABOUT THE DRIVER SHORTAGE, THEY ARE
CONCERNED THAT IT’S GETTING WORSE, AND THEY ARE ADDING SOME CUSHION TO THEIR SUPPLY CHAIN.”
—BOB COSTELLO, CHIEF ECONOMIST OF THE AMERICAN TRUCKING ASSOCIATIONS
year’s torrid increase. After the moder- ately bad weather of January to March 2015, pressure started to ease in the spot market, and rates began falling. Meanwhile, the rolling back of hours of service regulations to previous levels relieved some of the equipment shortage. On the plus side for carriers, fuel prices were dropping at the same time, easing the pressure on their bottom lines. “The loads are still at really high
levels,” Costello said. “There was this massive peak in ’14, and it’s still above ’13 and ’12 and ’11 and ’10, and the rates have really followed a similar pat- tern.” Spot hauls typically have two sea-
sons when they are at their busiest: 1) late spring to early summer and 2) the back-to-school through Christmas season. Rates vary depending on lane, region, the type of equipment used and the type of freight that is hauled. Montague emphasized that what’s true nationally isn’t necessarily true at the local level. In the Little Rock market, the flatbed sector has been busy since the weather warmed up and construc- tion season began. From March until he was interviewed in mid-September, it’s been hard for shippers to get a truck in Arkansas. “Our load board, we see 54 loads
posted for every truck posted, and that’s an indication that trucks just don’t want to post because there’s plenty of freight available,” he said. With that kind of ratio, Arkansas
carriers should be able to charge what- ever they want, right? Not necessarily, because Arkansas’ surrounding states, aside from Mississippi, have much lower
ratios, and carriers based in those states are poaching business. At the time of the interview, Texas’ ratio was 4.6 to 1, while Tennessee’s ratio was 7.3 to 1. “If those numbers were like the
Arkansas numbers, then it would be easy for the Arkansas carriers to main- tain higher rates,” Montague said. Montague said Arkansas, like much
of the nation, has been quiet in the dry van and refrigerated spot markets. For flatbeds, two parts of the country have been doing well: the south-central region from Mobile, Ala. to Arkansas, and the Pacific Northwest, where a lot of lumber is being hauled. California and the border regions are having a weak produce year, which is helping increase capacity. Because of the slow- down in natural gas drilling, hauls have slowed in the Houston market.
ELDS AND THE MARKET Broughton said he’s currently
watching closely to see what happens with electronic logging devices. At the time of the interview, the motor carrier industry was anticipating a promulgation of a rule by the Federal Motor Carrier Safety Administration that would require all carriers to install those devices in their trucks within the next few years. That would reduce the number of
hours some trucks are on the road, and as demand increases, so will spot rates, which he said are always more volatile than contract rates. “Predicting spot rates beyond a
few months is a fool’s errand,” he said. “That’s why they’re called spot rates.” ATR
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