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The most recently published data (April 2020) indicates that the transportation market has been hit similarly to many other industries due to COVID-19. Comparing shipment volumes from March to April, the North American freight market saw a 15.1% decline, and the year-over-year change showed a more dramatic 22.7% decrease. Several carriers that reported Q1 2020 earnings in April noted carrier demand fell 10-25% across all transport modes (except small package).
When analyzing truckload linehaul pricing, spot market rates have remained relatively flat throughout early 2020, however rates are down 7% since year-over-year and 4.3% from April 2018. This pricing erosion has affected all truckload transport types, with dry van rates down 14%, reefer rates down 8%, and flatbed rates down 18% (all measured year-over-year).
These depressed rates are the result of an environment fit for shippers – surplus carrier capacity coupled with a reduced shipper pool indicates an excess in transport supply versus demand. As long as capacity exceeds demand, shippers should feel relief on linehaul rates in addition to lower fuel surcharge fees based on current diesel prices.
However, it is believed that the overall transportation market and spot market both bottomed out in April / early May, and we could see spot market pricing increase. The release of May transportation data will be a critical look into the state of consumer confidence and how North America’s reopening efforts are tracking.
If the data points towards a market rebound, shippers should prepare for spot market prices to climb slowly and will need to evaluate contract rates against spot market rates to determine the optimal way to purchase freight. Spot market pricing typically serves as a leading indicator for the direction of contract pricing; if spot market rates continue to climb, we can expect a similar reaction in the contract market 3-6 months after the spot market rebound.
*Data Source: April 2020 Cass Transportation Index Report
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