Freight Volume Shipping Rates Decline…again
Analysts have reported a decline in freight volume from March to April 2023.
This can stem from a multitude of reasons, some of the top contributors being that March had three more business days than April.
Another potential reason could be that March is the final month in the quarter, which is when shippers are more likely to move inventory to get it off the books.
While these explain the recent drop in freight volume, it doesn’t explain the drastic year-over-year decline from March 2022.
According to data from DAT Freight and Analytics, dry van freight declined 15.5% and 12.3% in March and April 2022.
The same data also shows that temperature-controlled freight dropped by 16.3% in March and 12.5% in April 2022.
DAT goes on to report that dry van and temperature-controlled freights hit their lowest rates since February 2021, which was likely caused by the polar vortex that resulted in frigid temperatures and severe weather related delays.
“May will be pivotal for shippers, brokers and carriers,” said Ken Adamo, DAT’s chief of analytics. “After a challenging first four months of the year, we expect to see the effects of seasonality on freight volumes and rates. The question is how sustainable those effects will be.”
The press release from DAT Freight and Analytics shows that the load-to-truck ratios on its load board for all three categories were low.
The issue with this is when fewer loads are posted for each truck, there is a higher chance of competition for those available loads and rates are pushed down.
As a result, all three categories (dry van, temperature-controlled, and flatbed) experienced lower rates.
The average dry van and temperature-controlled spot rates fell 10 cents below March and 71 cents per mile from April 2022.
Flatbed spot rates declined 4 cents and were 70 cents per mile lower than in April 2022.
Adamo claims that there are two things that would cause these rates to go back up, fewer trucks and more freight.
In order for there to be fewer trucks carriers would need to reduce their need for them, resulting in a decrease in orders and ultimately a decrease in profit.
Having more freight should be fairly simple as there is typically an increase in freight as construction and produce harvesting begin.
But, with inflation and higher interest rates, this could hinder the effects of having more freight.
A May 16 release of ACT Research’s Freight Forecast, U.S. Rate and Volume OUTLOOK report addressed carrier closings.
“Interstate operating authorities are contracting at a record rate, with about 11,000 net revocations since last October, including about 1,600 net revocations in April,” said Tim Denoyer, ACT vice president and senior analyst. “This is beginning to tighten capacity, which will also help spot rates find the bottom and begin to rise.”
Another factor that really affects these numbers is the number of drivers employed. Which, as we know, hasn’t been great.
“Long-distance trucking employment is also contracting, as long-haul trucking jobs declined by 8,700 jobs in Q1’23, or 1%,” Denoyer said. “While still up 3% year-over-year in that latest March data point, the series will be down on a year-over-year basis by June on its current level. Since trends in employment follow trends in freight rates, long-haul jobs are set to decline this year.”
The Bottom Line
It’s hard to predict when freight rates will pick back up, but in a few months we will have a better understanding. Until then, one thing you can do to combat this, is get started in the trucking industry.
Semi-truck drivers are in high demand and fleet owners are willing to pay a pretty penny for drivers. For more information about becoming a semi-truck driver, check out this article.