Coronavirus Breeds Supply Chain Disruption

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Market updates in response to COVID-19

To help DAT customers mitigate uncertainty in their businesses, the DAT Analytics Team has been observing market trends in near-real time, and we will continue to share updates on a regular basis.

If you have questions, see the FAQ below or email us: askiq@dat.com

Last update: March 24, 2020

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Inventory replenishment boosts truckload demand

The surge in volume from replenishment activities continues to drive up demand, as reflected in load-to-truck ratios (LTRs) and rates. It will be important to study the impact this trend has when combined with an increase in imports, drayage, and inland movements, when backlogged freight begins to arrive in large volume from Southeast Asia. For now, however, this assessment has not changed materially from last week's report.

The current situation is extremely dynamic, with a global impact. Typically, such volatile conditions are disruptive within a defined geographic area, as in extreme weather events such as blizzards or hurricanes. The COVID-19 response and economic effects have upended entire populations and industries across the planet, with many reciprocal connections. The unprecedented nature of this situation makes it difficult to provide guidance beyond the very short term. Shippers, carriers, and brokers are strongly advised to refer to current, actionable data in support of transportation pricing decisions now, and to keep a close eye on broader market conditions for additional insight into trends that will emerge over the next 7 to 14 days.

What happens next? Due to the tremendous uncertainty, both in our own industry experience and in our predictive models, it's too early to make a confident prediction beyond the next 14 days. We will continue to monitor the situation and model the potential outcomes, issuing updates when new information becomes available.

Questions? Contact the DAT iQ data analytics team by email: askiq@dat.com

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Demand growth drives ratios higher

Dry van load-to-truck ratios increased 11% week over week, and 66% since the beginning of the month. More dramatically, the average ratio has more than doubled (up 150%) since the same week in 2019. By separating the trends in load posts from the truck posts, we can see clearly that demand is the key factor driving the ratio higher.

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Load availability increases faster than truck posts

Load posts increased 14% sequentially, overtaking even the seasonal high-water mark of 2018. Supply edged up week-over-week, but not enough to interrupt a tightening trend for van capacity that began in early March. Compared to the same period last year, truck posts are down 9%.

Rate trends follow load-to-truck ratios

Spot dry van rates rose 7% over the past week, and gained more than 12% since the beginning of March. Compared to the same period in 2019, rates are up 10%. The rising trend crossed into positive territory two weeks ago, for the first year-over-year increase in more than 18 months. Dry van rates can be expected to continue rising for the near term. While rates have already surpassed typical seasonal levels, they are still well below the 6-year highs of 2018, so there is historical precedent for continued growth. Spot rate trends follow load-to-truck ratios closely, so monitoring the ratios will provide directional guidance.

Reefer demand intensifies

Shifts in consumer purchases have a profound impact on reefer demand and rates. Nationwide shutdowns of schools, restaurants, and other food service venues has focused shippers' and carriers' attention almost entirely on retail grocery outlets, including e-commerce. Further, reefers must be loaded "live" with perishable goods, making delays and disruptions even more costly for the carrier. In the coming weeks, a new layer of demand will be added to the mix when spring produce harvests begin. Reefer rates can be expected to remain elevated from now through the end of June.

Flatbed spot rates are following normal seasonal patterns, but on the low side. This does not come as a surprise, as it is rare for groceries or general retail merchandise to move on flatbeds. Also, the recent steep drop in oil prices has slowed demand for flatbed equipment in energy-related sectors. Flatbed rate charts are not included in this report.

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Frequently Asked Questions About COVID-19 and DAT Data

Many of you may also have questions specific to your business. You can submit those questions by email to askiq@dat.com and we’ll do our best to help answer them. We’ll also share the most common questions on this page for everyone’s benefit.

What can trucking-related data tell us about the health of the U.S. economy?

The trucking freight market is a leading economic indicator because it reflects supply and demand in near real time. Trucking freight data can signal changes in consumer behavior and sentiment, like the surge in demand for household staples and nonperishable foods caused by the COVID-19 pandemic. You can also see early signs of supply chain disruptions, which will have far-reaching impacts on everyday Americans.
What data sets and analytics tools does DAT have to offer?

DAT’s database of more than $68 billion in freight transactions and 40 years of continuous records represents unmatched breadth and depth in the trucking industry. DAT compiles actual payment records for every point-to-point lane in the U.S. and delivers current, historical, and predictive rate information and analyses. DAT’s more than 450 employees include data scientists, software engineers, and market analysts who mine our extensive database for valuable trends, insights, and intelligence.
What broad trends do we see in the U.S. truckload freight market due to COVID-19?

We’re seeing a lot more volatility in the marketplace, beyond what is predictable based on historical patterns like seasonality and day of the week. For example, we would expect to see a seasonal slowdown in supply around the Chinese New Year , but the slowdown lasted longer due to the COVID-19 outbreak and factory closures in mainland China. That slowdown was followed by sharp increases in spot rates as truckers work hard to keep grocery store shelves stocked with paper goods, food, cleaning supplies, and other household essentials as state and local governments enforce social distancing measures. Along with rising spot rates, other metrics also indicate a tightening of capacity as supply chains work to keep pace with demand.
Does this global disruption have parallels in recent history?

There are several smaller-scale examples of global supply chain disruptions in the 21st century, but the scale of COVID-19 is unprecedented in recent history. Both SARS in 2003 and MERS in 2012 affected manufacturing, but the impact on the American supply chain was diffuse and did not reach the economy at large in the same way we’re experiencing now. Other disruptions like hurricanes or wildfires tend to have local or regional effects on freight market indicators, not national or global impacts.
What patterns do we expect freight markets to follow in the coming months?

The event with the most similar impact on the US freight market in recent years was the ELD mandate. The ELD mandate had a comparable effect on loadboard activity and rates as the industry adapted to the new regulations. Bankruptcies also went up and market indicators bucked seasonal trends. There is a strong likelihood that COVID-19 will follow suit.

Unlike COVID-19, however, the ELD mandate was a singular event. The market adjusted over time and eventually returned to seasonal patterns, but the progression and future impact of this virus is still unclear. With both COVID-19 and the ELD mandate we’ve seen that uncertainty affects the freight industry in similar ways, but the current period of uncertainty is unprecedented in both length and degree. As more states issue stay-at-home orders and more businesses close, it remains to be seen how the market will be affected. Eventually infections will peak, and an adjustment period will commence. When that adjustment is complete, we expect a return to the seasonal trends. We don't yet know how long each phase of that process will last, however.