Brokers: spot rates “escalating sharply”

The unprecedented surge in truckload volumes to restock retail stores with groceries, soap and hand sanitizer, bottled water and electronics is tightening trucking capacity and pushing spot rates up.

On a national basis, contracted truckload volumes are now up 16.5% year-over-year (OTVIY.USA). Meanwhile, the rate at which these loads are being rejected by carriers and brokers has reached 9.76% (OTRI.USA), well above any level reached last year except during the Christmas holiday. In Allentown, Pennsylvania, carriers and brokers are rejecting 15.5% of loads; in Quincy, Illinois, they’re rejecting 32%. The tightest regions in the country are the extreme Northeast, including Maine, and the Mountain West, including Denver and Grand Junction. 

Volume growth has been biased toward short-haul refrigerated freight: reefer volumes are up 25.37% year-over-year (ROTVIY.USA); and short-haul loads are up 26.6% year-over-year (SOTVIY.USA).

Jeff Scharbach, an owner-operator active in driver-oriented Facebook groups, reached out to FreightWaves to talk about produce markets. 

“On Friday [March 13] around 3:00 p.m. I got offered $2,350 on about 750 miles out and back to Boise, and the broker was specifically talking about the panic and all the restocking needed,” Scharbach wrote. “I took the load, and while out at the WinCo waiting to get loaded, I heard the guys working there talking about how that day they were shipping out 13 million pounds of product to restock, whereas on a normal day it was more like around 1 million pounds. They said they were shipping 4 times the amount of groceries than they do leading up to Thanksgiving.”

Because recent volume growth has been biased toward short-haul temperature-controlled freight, it hasn’t translated to any growth in intermodal. Rail intermodal volumes have deteriorated steadily since the beginning of February. Although loaded 40’ volumes outbound from Los Angeles have begun to recover (ORAIL40L.LAX), levels are still well below any point prior to the Chinese New Year-coronavirus collapse in mid-February.

Wait times at shipper facilities across the country are at 159 minutes (WAIT.USA), an all-time record, and above most carriers’ threshold for charging detention times. Carriers typically allow 120 minutes of waiting while loading and unloading before they start charging shippers for their time; now the average load will incur detention. 

Major outbound markets have seen wait times spike even higher – Atlanta wait times are averaging 277 minutes (WAIT.ATL), and in Philadelphia, trucks are waiting 322 minutes on average to be loaded and unloaded (WAIT.PHL). 

Over the weekend, the Federal Motor Carrier Safety Administration (FMCSA) waived hours of service requirements for carriers participating in coronavirus relief efforts, which include the movement of medical supplies as well as the emergency replenishment of grocery stores.

The tightness in trucking freight markets is being driven by widely distributed growth in freight demand, or volume, although some freight brokers believe that as the coronavirus health crisis drags on, the supply or capacity side of the marketplace will also tighten. Truckers may be less willing to drive – and receivers may shut down – if new infections keep accelerating.

(Map: FreightWaves SONAR. Height indicates market share of outbound freight; color indicates tender rejection rates).

An executive at a New York State-based freight brokerage said “anything booked today will look cheap compared to Thursday and Friday.”

The CEO of a Texas-based brokerage commented that the “produce market is strong,” and a Chicago-based brokerage CEO said that “rates will be high this week.” When asked which lanes specifically would be higher, he said, “all of them.”

An executive at a freight brokerage heavily concentrated in refrigerated loads said that his shop is dealing with “approximately twice as much freight as we normally do, and revenue per load is climbing steadily.” Spot rates are “escalating sharply,” he added.

FreightWaves’ SONAR platform has spot rate data from Prices on several lanes have inflated this year. Dry van spot rates from Atlanta to Philadelphia (TSTOPVR.ATLPHL) are up 11.4% since February 2 to $1,583.68, inclusive of fuel, or $2.03/mile. Spot rates for reefer equipment on the same lane are $2.15/mile. 

At a major asset-based carrier, a brokerage executive worried about how long the rush to replenish stores would last.

“As more businesses close or have dramatic slowdowns, it might impact volumes,” he said. “This replenishment has been a nice shot in the arm for demand but we’re not sure how long it lasts. It would appear consumer spending and the overall economy is about to slow down big time.”

As schools and businesses – including brick-and-mortar retail and bars and restaurants – close around the country, the widespread expectation in the financial community is that consumer spending will go negative on a year-over-year basis. S&P 500 trading was halted this morning as futures gapped down by 7%, triggering the market’s ‘circuit breaker’: this morning was the third time that has occurred in a week. Meanwhile, 10-year U.S. Treasury yields fell to 0.84%, reflecting investors’ desire for stable returns and expectations of deflation and lower asset prices in the future.