Coyote Logistics Chief Strategy Officer Chris Pickett says shippers can benefit from the sharp drop in spot rates and believes the market still has yet to hit bottom.
The U.S. truckload market has seen spot rates take a sharp downturn in 2019 amid more available capacity, leaving shippers with the upper hand, unlike last year when capacity was so tight shippers were striving to figure out how to market themselves as a “shipper of choice” to carriers in order to even secure space on trucks.
For the week of April 22 to 28, compared to the corresponding period in 2018, national average van spot rates fell 15.8 percent, while national average flatbed and reefer spot rates both fell 11.4 percent, according to load board operator DAT Solutions.
In April, the national average van spot rate was $1.81 per mile ($2.25 per mile contract rate average), the national average flatbed spot rate was $2.34 per mile ($2.62 per mile contract rate average) and the national average reefer spot rate was $2.15 per mile ($2.55 per mile contract rate average), DAT’s data showed.
“Current truckload supply now materially exceeds truckload demand, contract rates exceed spot rates and conversations will likely be migrating towards ‘carrier of choice’ over the course of the year,” according to Coyote Logistics, a 3PL that was acquired by UPS in 2015.
Chris Pickett, Coyote Logistics’ chief strategy officer, said in a webinar Thursday that the company does not believe the U.S. truckload market has hit the bottom yet and that it will probably be about another quarter before it bottoms out and turns back toward inflation.
Pickett said there is a “very strong expectation that we will be in a deflationary spot truckload rate environment for the entirety of 2019, although decreasingly so before flipping back to an inflationary market as early as Q1 2020.”
Additionally, he noted that the 2017 corporate tax reform, which brought the corporate tax rate down to 21 percent, created much more available cash for carriers to invest in their fleets, which has been resulting in more capacity. This trend can be seen by looking at DAT’s data, which shows that U.S. truckload spot market capacity for the week of April 22 to 28 was 30.7 percent higher year-over-year.
Pickett said the current U.S. truckload market environment presents shippers with opportunity. He said that shippers probably won’t exceed their 2019 freight budget due to unplanned spot market exposure like many did in 2018 and added that seasonal demand dislocations and hurricanes will probably have less of an effect on overall spot market rates. He also said shippers should anticipate a record primary tender acceptance. “There is no compelling financial incentive for any contract carrier to turn down any primary tendered load to chase spot market opportunities,” he said.