Recovery is Underway for Freight Markets! What Does This Mean for Shippers?
Jun 3, 2020
BY MIKE REGAN, CO-FOUNDER OF TRANZACT
We could all use some positive news and thankfully we have some for you: Many signs are showing that the freight markets are starting to recover.
As we mentioned last week, April was one of the worst months for freight activity in over 26 years. But in looking at the data for May, we are starting to see a much brighter picture. It looks like the freight markets are reaching levels similar to 2019 - with greater growth yet to come. I know. Celebrating 2019 freight levels is not ideal, but it is a start!
This has implications for shippers. As we learned in our interviews with carrier CEOs such as Derek Leathers, Rob Estes, Darren Hawkins, and Dave Yeager, when the post COVID-19 recovery begins, capacity will once again be an issue. And that is what we are starting to see.
For example, according to DAT Trendlines, spot load posts were up about 80% from April to May, and down only about 8.5% from 2019 to 2020. While 2019 was a relatively subdued year for freight demand, these upward trends in spot rates look like the beginning of a recovery.
The contract rates for van and flatbed dropped slightly from April to May but reefer rates rose about 5%. While these categories are down about 10% from 2019, it looks like these rates will continue to rise throughout June. Given that there is a two to four week lag between rates and capacity, it is important to note that load to truck ratios have risen greatly for all three categories from April to May and for all except for flatbed from 2019 to 2020.
Another encouraging sign of recovery is that consumer spending is now only down 10% versus 40% at the worst point of the COVID-19 contraction. Overall, there’s hope that the recovery could be accelerating as volumes grow with states reopening, stimulus funding giving way to spending, and produce season gets going.
What should shippers do in response? We recommend that you follow the aforementioned advice from the carrier CEOs and people like MIT Professor David Simchi-Levi and lock up your capacity for the remainder of 2020 and into 2021!
As sourcing experts, we have a wealth of expertise and experience that can help you identify those carriers that can effectively support your company and get contracts and rates in place with those carriers. So if you could use a hand with this, get in touch with us.