The number of truckload tenders has increased by 7% since the beginning of the year. However, they are still significantly lower than in 2021. Spot prices for truckloads have increased by 13% since early May. This does not include anticipated fuel expenses. It Is the brief yearly uptick, a sign that the freight market’s post-pandemic funk is finally over?
The answers to both questions are yes. The freight market fluctuates, which is good news. However, it doesn’t prove that supply and demand are balanced.
Market Speculation And Lack of Transparency
Spot rates are the result of a number of factors coming together. They make it easy to figure out how much it costs to move a full truck over a certain route. During the winter holidays, companies have shorter service times and fewer carriers available.
There hasn’t been a big drop in supply. Speculation about future rate hikes could lead to market inflation. Shippers, dealers, and carriers lack a complete market view.
Carrier Costs And The Impact of Customer Footprint On Pricing
The price considers the provider’s costs. Predicting direct costs, such as hiring people and buying tools, is easy from the outside. The network driven by their client presence is unclear.
For example, a large client may account for most of a carrier’s freight leaving the Houston market. To get more people in the Houston area and still make money, the company offers prices that are lower than the average market price and sometimes even lower than direct costs.
If they lose this customer, the freight company will have to change how they set prices to Houston. In the United States, this is becoming a bigger problem right now.
Shifts In Demand Patterns And The Impact On Freight Contracts And Pricing
International flights from Ontario, California decreased from 4.25 percent to around 3 percent by the end of 2022. However, international flights from Atlanta and Dallas remained stable or increased during that time.
Freight contracts moving west have been underpriced. This is due to the dramatic decline in demand from Southern California compared to major Eastern markets. The low volume of freight on that route results in a shortage of resources and increased price volatility in the area.
Signs of Market Stabilization
TRAC says that the spot cost between Los Angeles and Dallas is $2.15 per mile as of May 1. This is a 23% increase over the previous rate on May 1. Even though rates will go up a lot in the next few months, they are still 20% lower than they were at this time last year and much lower than contract levels. Rates are going through an adjustment process to bring them back into balance.
The national Outbound Tender Volume Index (OTVI), which is a measure of customer demand for truckload contract capacity, has been going up since January. This is similar to a yearly pattern that was in place before 2020.
In 2023, spring demand started and kept going faster than it did before the pandemic in 2018 or in 2019 . The market may also feel better knowing that demand will drop a little in July.
In conclusion, since the beginning of May, spot prices for truckloads have gone up by about 13%, and bidding numbers for truckloads have gone up by about 7% since the beginning of the year, though they are still a long way from their highs in 2021. The fact that the freight market goes up and down instead of always going down is good news, but it is not proof that supply and demand have balanced once again.
Also, these measurements are particularly useful for determining the cost of hauling a full truck over a given route. Shippers have reduced service windows and carrier availability reduces during the winter vacations. If you love checking trucking & logistics news daily, then check Lading Logistics. It provides you with the best logistics solutions in the USA.