Monthly market update: if history holds, the market is set up for a new November peak in rates

Graph: SONAR

The recent slowdown in spot truckload rates, when seen through the perspective of data history, could be setting the market up for a surge in rates just before Thanksgiving.

That was the conclusion of FreightWaves CEO and managing director Craig Fuller in the company’s monthly market update, conducted by both Fuller and FreightWaves chief economist Ibrahiim Bayaan. Drawing on data from the company’s SONAR data base offering, Fuller was able to pinpoint just when that surge might be: the week of November 16-23.

Referring to DAT rate indices, Fuller noted that the trucking market has been rife with discussion about recent weekly declines.“We saw really high peaks in June and we’ve fallen off in July and August,” he said. “What the industry forgets is that this happens every single year.”

The question then, Fuller said, is to look at present market conditions, compare it to past data and figure out if the recent decline says anything about the future. The predictive model from SONAR is that a decline that begins sometime in July generally fades by mid-August, Fuller said, “and then we’re off to the races.”

The subsequent runup generally goes for 20-21 weeks, Fuller said, “and then we consistently see a peak again in the second part of the cycle.” That November date range for a projected peak is derived from the 20-21 week history.

Based on data, the increase from the trough to the peak has been as small as 27% (in 2015) and as high as 75%, set last year. Fuller said the comparisons were made on the Los Angeles to Dallas lane, given its volume and traditional volatility.  

Noting that the current price in that lane is $1.82 per mile, “you can actually project that it will be between $2.30 and $2.40 at the peak,” Fuller said. Potentially, if there is a “major capacity crisis,” or a “black swan” event, a $3 mark could be reached, though Fuller stressed that was not his prediction.

In a discussion in which the current addition of tariffs into the market mix came up several times, Fuller pointed to data on container prices out of China into both the U.S. West Coast and East Coast as a sign that so far, the tariff wars are not impacting the freight market. For example, the FreightOS Baltic Index for China to the western U.S., which is available in SONAR, currently stands at 2064, the highest level in recent months. It was at 1200 as recently as early July. The corresponding China-East Coast number of 3090 has plateaued of late, but still is the highest in many months as well. “The indicators are still showing that freight is coming across the water,” Fuller said. “The shipping lines have pricing power in those lanes and they are able to get much higher spot prices out of China into North America.”

Economist Bayaan noted that the goods that have been caught up in the tariff disputes and whose movement, if constrained, might have pushed those numbers down constitute a relatively small portion of GDP, less than 2%. On that basis, he said he does not anticipate a significant impact on the strong economy from their imposition.

But any impact is more than just numbers, Bayaan noted. “When you listen to business leaders and purchasing managers, their concern is more that rather than taking action, they just don’t know what to expect, and it has complicated things that didn’t have to be complicated,” he said. But if they do take action, Bayaan said it could come in the form of pre-buying of products and importing goods earlier than they might have otherwise, as a hedge against future tariff-driven price increases.

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Graphic: SONAR