Uber Freight report: Contract rates still falling
Uber Freight recently released a report on contracted rates. Its consensus is that contract rates are indeed falling, but like a game of contracted musical chairs, we still do not know when the music will stop.
“In terms of rates, we saw an unprecedented increase in 2020, which remained elevated in 2021, across all spot rates,” Mazen Danaf, Uber Freight’s senior economist, said in the report. “Then rates collapsed in 2022, which mirrored and paralleled the increase in June 2020. It was the most-rapid increase in history, and then in 2022, the most-rapid decrease. Rates were going down 30 cents per month for two months in a row. Since May or June, spot rates have been stabilizing at some level and continuing a slightly decreasing trend.
Another important note was the interplay between the frenemies of intermodal and trucking, where truckload orders often go on the rails when price and service are good. Currently truckload is cheaper and rail service is still falling behind, forcing many shippers to choose truckload over rail. This leaves shippers in an interesting position where they finally regained pricing power.
“Shippers are shifting from surviving, from just waking up every day and trying to find trucks, to being a little more thoughtful and strategic,” Ben Cubitt, Transplace’s senior vice president for procurement and engineering, told FreightWaves’ JP Hampstead. “Shippers are trying to focus on service, getting the network stable and doing a lot of network optimization studies. They’re setting themselves up for 2023 and beyond to be able to support the network again and be a reliable part of the supply chain. There’s been a tremendous effort to educate C-suites that while cost-savings opportunities are available, it’s actually a good thing that our networks are more stable.”
BLS data: Truck transportation jobs September surprise
Friday’s BLS data showed more disappointment than when I told my father I was quitting Little League. Digging holes in the outfield was a fun pastime, but the labor market appears to have dug itself a transportation-sized hole with the loss of 11,400 jobs in September. What is striking is this is only the third month since the pandemic began in which truck transportation jobs dropped, according to FreightWaves’ John Kingston.
This decline, now in the top three by size since the pandemic began, is larger than the March 2020 report of a 7,000-job loss but smaller than the record decline in April 2020 when the trucking sector shed 78,000 jobs, Kingston said.
A key challenge will be parsing out what specific jobs were lost from this large government bureaucratic database. In a conversation with Kingston, he noted we may have to wait another month before the government releases a more detailed breakdown to see exactly what specific jobs were impacted. Until that time, we’ll be left with more questions on what this will mean for trucking employment numbers moving into a potentially soft fourth-quarter peak freight season.
Another key topic to watch will be if this job decline precedes broader job losses in the greater labor market. So far this isn’t the case, with payrolls rising by 263,000, showing a strong job market in spite of inflation and recent Fed moves.
Will trucking job losses be a canary in the economic coal mine? That will be the question economists and equity analysts will be sweating, as contractual truckload pricing is moderating, freight volumes are slowing and the peak season expectations remain mixed.
Market update: Control the rate, control the freight
Rates will continue to be important data to monitor as we begin the fourth quarter. Over the past week, the impact of Hurricane Ian was not enough to meaningfully improve spot market rates. The spread between contract and spot market rates remains wide at 83 cents, forcing carriers to prioritize contracted loads and solicit for ad hoc project freight before attempting to book on the spot market.
For carrier pricing managers, another challenge will be attempting to secure more contracted freight opportunities, as many shippers are seeking high-single-digit rate reductions for incumbents. Even with rate reductions, contracted freight rates will be favorable over spot market losses.
This competition will continue to pit both carriers and brokers against each other, with rate reductions, tender compliance levels and service scores being the ammunition. During times of market transition, a shippers market will not only cause disruptions to carrier load volumes but increased attention to service levels. The risk for carriers is shippers tendering to other carriers further down the routing guide if their rate or performance failed to live up to par.
FreightWaves SONAR spotlight: Ontario, California’s market share drops double digits
Summary: SONAR’s Outbound Tender Market Share (OTMS ) measures the number of outbound tendered loads in an individual market in relation to total tendered load volume for the day in the U.S. Each market represents the percentage of total U.S. load volume that originates in that market for a total of 100% across all markets.
It’s not overly surprising that Atlanta, Ontario and Dallas are holding most of the market share as those are major transportation markets. The key takeaway is that Ontario has dropped 12% week over week in its share of the U.S. trucking market. It could have something to do with rising diesel prices in California, but it’s more likely a result of the waning threat of a railroad strike that spiked truckload volumes 20% higher in mid-September. Domestic intermodal volumes dropped 10% that week but have recovered and then some, rising 10% above the previous three-month average.
The Routing Guide: Links from around the web
Shipping giants are still rolling in cash — but time is running out (FreightWaves)
Kenco Logistics will be acquired by private equity firm (FreightWaves)
Shops would do well to focus on culture when hiring young techs, Votech officials say (Commercial Carrier Journal)
Class 8 truck orders set monthly record in September (FreightWaves)
Truck brake-light exemption denied despite industry support (FreightWaves)