After a year of falling rates and closing companies, the trucking market seems to be stabilizing. This is good news for carriers who cannot afford another hit, but 2020 is not expected to bring surging rates. Carriers will have to think strategically to take advantage of moderate rate increases this year.
“The freight market appears to have pushed through the contractionary period and has stabilized entering 2020,” FreightWaves Director of Freight Intelligence Zach Strickland said. “Just like the 2019 oversupply was a result of an overheated 2018, 2020 will see the repercussions of a soft 2019 as the year progresses.”
The ramifications of 2019 will come in the form of shrinking capacity, pushing rates up as supply falls to meet demand instead of dwarfing it.
SONAR’s U.S. Outbound Tender Rejection Index (OTRI.USA) sat at 6.6% during the last week of January, representing a slow climb from the rock-bottom rates seen during last year’s contracting market. Rates plummeted under 4% in August 2019.
OTRI measures a carrier’s willingness to accept loads tendered by shippers under contract terms. It is expressed as a percentage of loads rejected to total loads tendered. A lower OTRI indicates that carriers are rejecting fewer tenders.
OTRI rates climb when capacity shrinks, and spot rates significantly outpace contract rates. Rates fall when the opposite is true. OTRI moves closely with spot rates and acts as a strong indicator of the overall market.
Rates climbed to almost 13% during the winter 2019 peak, significantly higher than rates seen during the preceding summer 2019 peak. This suggests that rates are moving into a higher cycle.
With the exception of the seasonal spike in December 2019, rates have increased very gradually from their lowest dip. This slow movement indicates that rates will remain steady and somewhat subdued throughout the year. Rate growth in the 2-3% range is likely, according to Strickland.
There is no 2018-like windfall on the horizon, and many carriers are still struggling to recover from low rates in 2019. For owner-operators and small carriers with low levels of institutional support, it is crucial to manage loads carefully in order to get the most revenue possible out of a stabilizing market.
One way for owner-operators to maximize their options is by connecting with multiple brokers over a multiparty digital booking platform to streamline their work and open them to as much automated freight as possible.
Digital booking platforms, such as Trucker Tools, offer carriers access to premium loads they may never have come across otherwise. Carriers are able to book loads directly from the app, locking in opportunities instantly.
“Owner-operators are traditionally blind to broader market conditions and tend to have access to only a few shippers,” Strickland said. “Getting access to additional sources of freight through multiparty platforms only increases their chances for more and higher-paying freight.”
The Trucker Tools mobile app gained traction in the trucking community because, in addition to its Book it Now automated load booking feature, it offers drivers useful information like truck stop listings, routing guides, fuel locations and parking maps.
The app has been downloaded by some 850,000 independent truckload operators to date.
Trucker Tools enables drivers to get connected with many brokers over one platform, quickly find and secure quality freight, and take advantage of technology without investing large sums of money in the process. By doing this, the company helps level the playing field between carriers of all sizes.