Van and reefer rates took a slight dip this week while flatbed rates climbed to a new record high. Winter weather in the Northeast and parts of the Midwest have caused a delay in the usually booming produce season. Expect to see an increase in fuel surcharge costs as the recent spike in diesel prices have added approximately $0.10 / mile to truckload rates versus a year ago.

The van load-to-truck ratio fell 11% last week to 6.6 loads per truck. This dip is consistent with seasonal trends, however capacity remains at historically low levels. Cass reported in March that their TL Linehaul Index has not only been positive now for twelve months in a row, but pricing for trucking continues to gain momentum.

Spot market rates remain high as we enter April. Rates typically rise as we enter April and spring produce and home improvement seasons, but average spot rates remain 30 to 40 cents per mile higher than 2017. Truckload capacity continues to tighten, likely exacerbated by the first week of trucks being taken off the road for Electronic Logging Devices noncompliance violations.

Capacity remains tight in certain markets such as Georgia and South Texas. Most recent reports still show capacity remaining tight relative to demand for the foreseeable future. The driver pool continues to shrink due to more favorable employment alternatives.

Analysts project that the gap between 2017 and 2018 spot rates will narrow in the third and fourth quarters.  This does not signify a reduction for this year as much as it shows when rates began to skyrocket last year.  Continued tight capacity also means unanticipated network disruptions like major weather events won’t be easily absorbed.

We are seeing contractual rate increases still somewhat muted at 3% to 4%, but primary carrier acceptance has been low for this time of year. Carriers are still moving capacity to take advantage of the better paying spot market. The current concern is how many carriers may drop out of the industry after April 1, when trucks without ELDs could be fined or put out of service.

After a brief lull, we are seeing capacity tighten again in the Southeast.  Winter storms recently reduced productivity in the Northeast.  Analysts are continuing to increase their contractual rate increase percentages each month – now looking for 8% to 12 % contract rate increases for 2018.  

As anticipated, load demand was down in February versus January.  This is not expected to become a trend as a KeyBanc Capital Markets analyst reports “…inventories relative to sales remain at the lowest levels since late 2014, potentially driving restocking in coming months.”  Driver availability remains a challenge.  The latest news on U.S. trade policy introduces additional uncertainty regarding near to long term demand.

Truckload capacity in February is less restricted than January but still much tighter than a year ago.  Capacity on the west coast and in the upper mid-west is relatively loose compared with the rest of the country according to spot board postings.  We are expecting a shift to tighter markets as home improvement season begins and as the ELD enforcement is implemented.

Load volumes continue to increase at a greater clip than available truck capacity – keeping spot rates higher than a year ago.  We are quickly approaching the spring peak, so while trucks availability has improved compared with January, tighter capacity is likely after mid-March.