Freight Market Repairing Networks Heading into Q4

After a volatile first six months of the year, Q3 saw a bit more stability for shippers in certain segments of the market. Truckload growth slowed after two volatile quarters, particularly in the Southeast, while Mexico cross-border capacity loosened from its Q2 peak, according to new data released by Uber Freight.

Still, the broader network remains under pressure, with LTL prices reaching record highs and intermodal capacity tightening. 

Key takeaways:

·        Rapid rate increases during the first half of the year exposed weaknesses in many shippers’ routing guides. Contract rates set earlier in the year were no longer competitive on some lanes, leading carriers to reject more shipments, asking for contract rate increases,  and pushing shippers into the spot market to find last-minute coverage. By July, dry van spot rates had risen 48% year-over-year, and contract rates 19% YoY .

·        Some of that pressure eased in Q3. Shippers began repricing underperforming lanes, helping routing guides recover and bringing tender acceptance up to 78% in August. Spot rates also declined for seven consecutive weeks following the early-July peak. But the market remains more expensive than it was a year ago: the average dry van spot rate was up 36% year-over-year as of Aug. 26.

·        The underlying pressures remain as well. First, capacity, with 48,000 non-compliant drivers leaving the market over the past year and a backlog in equipment production. Second, fuel prices. The average diesel price reached nearly $6 per gallon in the first week of September, an all-time high. If fuel remains elevated into bid season, carriers are likely to seek larger rate increases, even with a fuel surcharge in place.