June 2024 Freight Market Update

Author
Matt Gonzalez, Freight Pricing
Published Date
June 20, 2024

We are about halfway through 2024. In the first half of the year, we experienced historically low rates due to excess capacity and flat freight volumes. Looking ahead, there is hope on the horizon for the back half of the year. Even though we continue to face overcapacity, trucking authorities are leaving the market and volumes are ticking higher. The back half of May displayed a 6% rate spike, with rates sustaining into June. As we step into the summer peak season, we can anticipate continued rate stickiness and potentially a steady rate increase through the 4th of July holiday.

Top Trends

Capacity is Plentiful

• Covering freight is not difficult and negotiating power is still in the hands of the Shipper.

• Seasonal tightness is most felt in Southern Cal, all of GA, Houston, Dallas and Memphis markets.

• The number of trucking authorities slowly declines toward equilibrium. As more trucks exit the market, the more sensitive to rate disruption the market becomes, the more expensive the pricing environment becomes.

• Pre-Covid Trucking Authorities totaled roughly 250,000, and we currently have 348,642 currently operating.

• Short haul and local freight remains the most desirable for company drivers as driver home time becomes a larger priority to increase driver retention.

• Tender Rejection Rates (OTRI) are inching up and currently sitting at 4.89. This means that only 1 out of every 20 trucks are rejecting their contract loads for the spot market. Anything under 5% indicates a deflationary market, but considering this metric was as low as 3.14 at the beginning of May, it’s a metric to watch closely as we progress through the summer.

Volumes are back!

• Dry Van:

• Outbound volumes reached their highest levels in 21 months at the beginning of June thanks to strong seasonal demand.

• Spot market load posts are up significantly, with 18.7% more MoM

• Reefer:

• Summer is here and so is produce season. Seasonal activity increases began in major Florida markets like Miami and Lakeland, and is now working its way into Jacksonville, Macon, Tifton, and Savannah.

• Texas produce season is working its way from South Texas harvests and Mexican imports into North and West Texas. Expect areas such as Dallas, Fort Worth, and Lubbock to increase their volume flow in June.

• Southern California’s produce volume has gained steam, with refrigerated volume being the highest they’ve been all year out of the Los Angeles market. Expect continued, elevated flow from SoCal.

• Flatbed:

• New Housing Starts are increasing Month-over-Month (MoM), maintaining seasonal trends of summer construction ramp up.

• L/T ratios remain elevated Year-over-Year (YoY), indicating upward pressure on rates

Spot Rates Rebounding, Contract Rates falling, both have a ways to go:

• For now, the Spot Market remains a place for “utilization freight”, where the average take rate is below, or at, operating cost. Carriers over-leveraged in the spot market are simply trying to break even.

• June is displaying stronger conditions with Van rates increasing to $2.05/mile, up from $2.02 in May and $1.99 in April.

• DAT’s Spot and Contract rate spread is tightening, displaying the smallest spread since the weather disruptions in January of this year.

• As the spread continues to close in, contract rates become harder to profit off of while the spot market begins to offer more profitable opportunities.

Sentiment

One Economist from the recent Freighwaves conference earlier this month mentioned that this is the “scariest time to price freight”. With how low brokers and carriers have to go to win freight, along with uncertainty about when the market will turn, he’s not wrong. This sentiment is keeping shippers, brokers and carriers alike all on their toes. While some shippers are gearing up for the market turn, keeping paper rates off of their RFP awards, others are still incentivized to maximize cost savings.

Outlook

• Shippers and Brokers need to plan to move their non-produce freight in produce impacted areas, as competition for the same trucks heats up. Produce impacted areas are FL, GA, SC, NC, AL, MS, TX and Southern California.

• Flatbed volumes, rejections, and rates are all expected to increase through June. Keep a close eye on Housing Starts, FOTRI and DAT’s L/T ratios.

• Increased seasonal demand will lead to continued upward pressure on van and reefer rates, especially as more carriers leave the market.

• While larger Brokers and Carriers are offering more sustainable, profitable rates to their customers, smaller brokers in need of market share have the opportunity to increase their load volume in the short term by remaining competitive on short-term bids and spot boards.

Hurricane Season

NOAA Hurricane Center predicts above normal 2024 Atlantic hurricane activity, with 17-25 named storms and 4-7 major hurricanes. Action plans for brokers and shippers alike are highly recommended, as rates and capacity will be impacted immediately across the impacted regions.

Diesel Fuel

The national average for a price of diesel fuel continues to drop as of June 10th, falling to the lowest price per gallon of the year at $3.658. This is primarily due to stagnant demand and a healthy supply. Brokers and carriers running long-term contract lanes will see their all in rates continue to fall, creating margin compression.

Playbook

Freight is flowing the most out of Dallas, Ontario, Atlanta, Houston and Elizabeth, NJ.

• Brokers

• Aim to win loads into the above markets, and negotiate with carriers to take under market rates going into strong outbound markets.

• Rising spot rates and lowering fuel costs will be factors attributing to margin compression. Keep a close eye on fuel and continue to find ways to drive purchasing power.

• Hurricane Action Plan: Understand your acceptance requirements, and anticipated lanes into/out of hurricane-prone areas and have a spot pricing strategy in place

• Carriers

• Understand the hot markets (Hot Markets Map on DAT, or % Market Share on SONAR), and position yourselves to take freight out of them. The hotter the market, the more negotiation power you have as a carrier. If necessary, take the discounted rates going in and charge premiums coming out.

• For the month of June, the highest rate increases will be experienced along the southeastern coast, Texas and California. Long hauls out of California will be among the most volatile lanes in the country.

• Shippers

• Be wary of the rates they are receiving from carriers and brokers alike. Take a close look at your carrier scorecards and find correlations between significantly under market pricing and on time performance.

• It’s time to start beefing up your routing guide with supplemental capacity. As we begin to come out of the Great Freight Recession, more of your incumbents will be prone to reject primary freight and look to the spot market for profit. Protect yourselves by onboarding new providers into your network.