Re-Opening Measures Positively Affect Truck Freight, Rates

With all 50 states relaxing COVID-19 shutdown orders to various extents, trucking shipments and rates are heading back up – but don’t expect a true recovery until 2021.

For the week of May 18-24, truckload markets continued to follow seasonal trends, and load-to-truck ratios on the DAT network continued to climb as a result, according to DAT Solutions. That put pressure on prices, which rose going into the long holiday weekend as more and more businesses reopen.

The number of posted loads actually dropped 16.5% during the week ending May 24, which includes the Friday, Saturday, and Sunday of Memorial Day weekend, but truck posts fell 29%. Shippers and brokers paid a premium to secure capacity ahead of the holiday, DAT said.

“The demand for trucks has steadily increased throughout May, following seasonal trends that are typical for this time of year,” wrote Matt Sullivan on the DAT blog May 27.

“The upward trends offers plenty of reasons to be optimistic going forward. Last week saw some of the biggest increases since late March, with many shippers paying a premium to get freight moved ahead of the long Memorial Day weekend.”

National averages for van and flatbed rates are still below where they were in April, although refrigerated rates were up slightly, reported DAT.

  • Van: $1.57 per mile, 6 cents lower than the April average
  • Flatbed: $1.88 a mile, 6 cents lower than April
  • Reefer: $2.00 a mile, 7 cents higher than April

The rolling national average van, flatbed, and reefer rates were 6, 7, and 8 cents higher, respectively, on May 24 than they were on May 1. Rates are low but trending in the right direction.

There are still many markets where truckload supply outweighs demand, Sullivan said. Hot markets, on the other hand, included Atlanta, Memphis, Houston, Los Angeles, Phoenix and Ontario, California.

Look for 2021 rebound

ACT Research is predicting that the economy will transition from contraction to growth over the course of the third and fourth quarters. “Clearly the global economy does not have the luxury of waiting a year or two for a vaccine to be developed before the current solution itself becomes the greater risk,” said Kenny Vieth, ACT president and senior analyst. “Our forecast anticipates that the U.S. economy, as defined by GDP, will not return to its Q4’19 size until after 2021.”

It’s not easy to restart supply chains that were totally shut down due to the pandemic, Vieth said. “In the supply chains that support complex OEM-level assembly operations, from raw materials to finished goods, it is not just about opening one plant, but opening thousands of plants simultaneously, making tens of thousands of parts that go into those assemblies in an orchestrated fashion, all with new layers of safety and testing protocols in place.”

On top of that, he said, getting buyers to market is another challenge “when the economy has so recently cratered and going outside poses an existential risk.”

However, Vieth said, because the pre-COVID economy was “structurally sound… with strong Federal Reserve and Congressional support, and rising pent-up demand, there is a case to be made that the economy will respond strongly into 2021.”

Coyote Logistics is predicting a similar recovery. “Though we expect a steep drop once all Q2 numbers are in the books, we have likely already hit the bottom in Q2,” writes the third-party logistics provider in an article explaining its latest Coyote Curve forecast for the truckload market.

“We’ll see a slow recovery the rest of the year and then rocket into 2021,” with spot market truckload rates rising year over year in the first quarter of the year, said Chris Pickett, chief strategy officer of the third-party logistics provider and author of the Coyote Curve forecast, in a recent webinar. Coyote said it expects contract and spot rates to more or less converge from here, and an inflationary 2021 spot truckload environment (barring a major economic setback).

Source

Posted in Truck Insurance News.