With truckload services going for a premium on the spot market since Labor Day, it has been difficult to discern where and when there has been opportunity to negotiate lower rates. Looking at the chart comparing Truckstop.com’s average van rate for its top 100 lanes and the national Outbound Tender Reject Index for van load requests, there has been a small divergence this week as spot rates remained elevated after rejections fell. This shows that many may have missed an opportunity to ship for less.
There is a pretty clean connection between tender rejection rates — the rate at which carriers turn down load requests from shippers — and spot rate movement. Carriers typically want to service their customers as much as possible, but when they more frequently decline requests for capacity — tender rejection rate increases — it typically means their services are in high demand.
The trucking spot market, like many financial markets, is a great place to judge the well-being of the trucking industry over time but can be difficult to use and understand on a daily basis. This is due to the fact many carrier pricing analysts (like me) and brokers will try to maximize their margins. If they are feeling confident, they push the upper limits of the ask price. Conversely, when their backs are against the wall, they sometimes push rates lower than necessary. This is where pricing becomes more art than science.
Looking at the spot rate versus rejection rate movement around Thanksgiving, rejection rates increased in front of the holiday sooner, while falling the week after the holiday. Part of this has to do with discovery.
Most analysts and brokers do not know the market is tight until they have already felt it in the form of operational feedback or failed coverage attempts. There are equally few signs when it loosens, especially when the loosening is minimal.
The story of the trucking market has been unseasonable tightness since Labor Day, which makes it an easy assumption that the market will tighten sustainably through the holidays. What many who have not worked in trucking don’t know is that capacity tightens more around the holidays because there is less driver availability.
This is a short-term impact that only lasts for a week or so in general as drivers are put into position to be at home or on vacation, which limits their load options. They typically get back on the road when most of us return to the office — or home office as many of us have come to enjoy this year. Meaning, the supply side contraction mostly ends the week after Thanksgiving after drivers get rolling again.
Market transparency is not the only reason for some disconnect between spot rates and tender rejections. Service requirements also play a role as many spot loads…
Go to the news source: Spot market carries momentum from Thanksgiving into December