2020: A tale of two freight markets

In this volatile 2020 freight market we’ve watched wild fluctuations in freight volumes and rates, with most traditional and reputable market indicators reflecting what we see—a bifurcated freight market.

Most market indices report the total volume of truckload freight being down year-over-year, although it’s quite a different story for some equipment types, commodities and freight markets.

Speaking at the JOC Inland Distribution Webcast, Dr. Chris Caplice, chief scientist at DAT Freight & Analytics and a senior research scientist at the Massachusetts Institute of Technology noted, “There were winners and losers, and that means there was an imbalance. Even in retail, which has driven the recovery, I can see winners and losers.” 

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In a normal market, the freight volume analogy of a rising tide lifts all boats would hold true, but in 2020 total volumes are in fact down for most shippers, but up for others. Even the typical split 90:10 between contract and spot market freight shifted closer to an 80:20 split during the pandemic. 

DAT’s contract freight volumes, encompassing an estimated $50b in freight spend, showed that October’s total dry freight volumes (spot and contract combined) were down 1.6% y/y. However, when breaking out spot and contract volumes, a very different picture emerges. 

Dry van contract volumes in October were down 10% y/y, while spot market volumes were up 107% y/y. In the refrigerated sector, a similar divergence was reported with contract volumes down 21% y/y, while spot market volumes rose a staggering 116% y/y. 

The resulting market imbalance is part of the reason for the record level spot rates and load post volume we’ve seen this year. Spot rates have jumped almost $1.00/mile since May and spot market load post volumes are now more than double y/y. 

More volume doesn't always help carriers, as they need a balanced network. Surging volumes concentrated on some lanes for some commodities has created a disruptive imbalance in freight volumes and more uncertainty for all market participants, and freight markets hate uncertainty. 

The latest FMIC Pulse Signal report helped put the last few months into perspective: 

“Entering the fall, there was a tremendous amount of uncertainty concerning the outcome of the US presidential election, the public and governments’ reactions to the pandemic, and vaccine development. Heading into December, we have gained some certainty in two of the three areas. One: The election is over and, while there are some minor legal challenges playing out, the outcome is essentially set. Two: On the vaccine front, there have been several very positive test results for vaccines that will shift the race from development to distribution. Three: The remaining uncertainty, and it is a big one, is how the public, government (at all levels) and companies will respond to what is turning into a massive resurgence of infections over the winter months. If we return to strict lockdowns, this could squash a lot of the economic recovery we witnessed in the early to mid-fall.”

As we get deeper into what’s shaping up to be the darkest period of the pandemic, we’re starting to see a repeat of what happened in March when stay-at-home, travel and work restrictions escalated at the state, region, county and city level. In these instances, consumption increases as more people stay at home and businesses reduce output accordingly. 

For carriers, this potentially means more lane imbalance and empty miles between freight markets as we head into Q121 - already a typically slower time of the year for freight.

Weekly Market Conditions updates:

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Dean Croke

Dean Croke is principal analyst for DAT iQ, the freight data and analytics operation at DAT. He brings 35 years of experience in the fields of data science, supply chain management, logistics, risk management and human performance. For the latest market updates, follow @LoadBoards on Twitter.