Truckload spot rates spikes are telling us something

Recent increases in regulatory pressure around English Language Proficiency (ELP) and non-domiciled CDL issuances have had some impact, but quantifying that impact has been difficult. The most visible effect occurred in October, when a Serbian news article reportedly prompted many eastern European operators — both compliant and noncompliant — to temporarily stop driving, causing a brief surge in spot rates. Rates had mostly normalized by mid-November.

The exit of capacity has also been obscured by weakening demand. Truckload tender volumes — shippers’ electronic requests for capacity — have averaged 5–10% lower year over year since mid-February, according to the newly released SONAR Truckload Volume Index (STVI). The unexpected drop in demand appears to be the primary reason the market’s transition out of a prolonged freight recession has stalled. Surprisingly, however, it has not made conditions materially worse.

At this time last year, the NTIL showed a more gradual, sustained upward trend beginning in late October and gaining momentum in early November — earlier than typical seasonality would suggest. Many interpreted this as a sign of a more durable market recovery outside normal seasonal pressure.

This year, instead of sustained movement, rates are characterized by sharper, more abrupt increases. This pattern suggests that carriers are unwilling to raise rates until it is absolutely clear they should — or can.

That hesitancy may be masking a tighter underlying market than headlines imply. It could set the stage for considerably more volatility in the coming year.

Winter weather has also played a major role over the past two years and could again push carriers offline and disrupt networks, even if demand remains weak. Spot rates are signaling that carriers are increasingly unwilling to operate in suboptimal conditions at current price levels.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.