Freight Boom in the (Not Very) Quiet Season

I’ve been in the freight transportation business for a long time — let’s just say “decades” — and this has been one of the most unusual seasons I can remember. Van rates rose in November, and they are still trending up. Spot market rates average $1.94 per mile for vans, and outbound rates continue to rise in key supply chain hubs like Philadelphia and Houston. In the past ten days, spot market van rates rose 6¢ and reefer rates rose 3¢, as a national average.

I checked in with some of our carrier and 3PL customers, and they agreed: This is supposed to be the quiet season for freight transportation, but they are incredibly busy. Nobody’s complaining, but they agree that this is far from a typical December.

The transportation director at one 3PL told me: “Truck demand has been extremely high. We even have rail movements converted to truck, which is strange! Everyone is trying to get their product on the shelf as fast as possible. Last year we did not see this. My conclusion: The economy is up!”

A non-asset-based freight broker said: “We are seeing opportunities from customers that usually don’t come our way. The sentiment here is that it’s weather-related. It seems like the weather has been abnormally volatile across the country, a bit earlier than expected.”

Based on their comments, as well as reports from industry analysts and general financial news, I have identified five big factors that are driving rates and volume in what is usually the off-season:

1. Extended retail deliveries. A lot of the activity is related to retail – gifts and food. That’s why van and reefer rates are elevated but flatbeds are well into their typical seasonal slump.

2. Weather delays. In most areas of the country, the weather has been very bad for weeks. Airports shut down, businesses closed, and trucks parked. That kind of disruption can cause pent-up demand, where freight that is in the pipeline gets delayed, and the final delivery schedules extend beyond the normal season.

3. Retail inventory levels. It was widely reported that Thanksgiving weekend sales results were disappointing, but we don’t know much about inventory levels prior to the holiday. Maybe the most popular items are being replenished now, for the remainder of the brief Christmas shopping season.

4. Thanksgiving was late. There are six fewer days between Thanksgiving and Christmas this year than there were in 2012. Plus, November was a short month, with only 20 business days, and 19 if you took off the day after Thanksgiving. That means the month ended on the 27th, for all intents and purposes. It’s not a surprise to find elevated demand for trucks in the first week of the new month, under those circumstances.

5. Timing pressure. One of my customers reported that they were shifting some freight that had been designated for rail intermodal and putting it on trucks instead. That is a clear indicator of urgency. Weather-related delays and the short Christmas shopping season could be responsible for that phenomenon, as well.

What surprises me most is the continuation of this surge in the current week. I’ll keep investigating, and I will report my findings here on the blog. Meanwhile, you can check DAT Trendlines for details of the latest capacity and rate trends across the U.S.