Los Angeles and Chicago spot markets stay hot

Mudslides in fire-affected regions have closed Highway 101 “indefinitely.”

DAT is reporting a relatively high ratio of loads posted to trucks available all over the country, although a few regions have softened since the white-hot conditions we saw during the peak holiday retail season last month. The national dry van spot rate average is at $2.28 per mile, up 36.5% year-over-year, and now leads the contract rate.

In particular, Los Angeles and Chicago spot rates have continued to go higher over the past seven days. First, early December wildfires in southern California pushed dry van spot rates to record highs—the fast-spreading Thomas fire in Ventura County spilled over Highway 101, and other fires shut down Interstate 5, disrupting freight flows and depriving L.A. of trucks. When the drought finally broke, those fire-damaged areas were vulnerable to heavy rainfall. With no vegetation holding in the soil, the same areas that had been burned experienced flash flooding and mudslides—now state officials say that Highway 101 will be “closed indefinitely” as crews pump out water and mud covering the roadway.

There’s also a seasonal component here: carriers are doing everything they can to avoid committing capacity to the Pacific Northwest, which is dead this time of year, now that Christmas tree season is over. Shippers moving freight from Los Angeles to the Pacific Northwest are essentially having to pay the truck to run there and back, because carriers believe that they will have to deadhead on their return routes.

Northbound dry van spot rates out of Los Angeles are consequently the highest they’ve been all year. Over the past seven days, spot rates from LA to Seattle are averaging $2.98 per mile, up 38.6% year-over-year. LA to San Francisco is at $3.16 per mile, up 31% YOY. 

We also believe winter weather—including the polar vortex, which exacerbated lake effect snowfall—has also had a pronounced effect on the Chicago spot market up through last week. The extremely low temperatures, high winds, and blizzard conditions shut down highways and halted freight from Minnesota through the Great Lakes into New England, and then the entire East Coast was hit by a ‘bomb cyclone’. Even though the city of Chicago itself isn’t currently experiencing severe weather, we think that disrupted lanes and delayed shipments elsewhere in the country have contributed to a lack of capacity in Chicago. Trucks that would have made deliveries at rural destinations in the Midwest and Great Lakes and then returned to Chicago to pick up another load to bring back to their origin have been thrown off schedule. In other words, it’s not that Chicago is being unusually impacted by severe weather, it’s that the trucks stuck in weather-affected regions haven’t been able to get back to Chicago.

Therefore, dry van spot rate averages out of Chicago over the past seven days are much higher than usual. Chicago to Philly is averaging $3.74 a mile, up 62% from last January. Chicago to Atlanta is averaging $3.05, up 50.2% YOY, and is experiencing extreme volatility—in the past seven days, per-mile rates in that lane have been quoted at everything from $4.07 to $2.03, according to DAT RateView data. Backhaul rates going west out of Chicago have been climbing ever since they shot up in September/October. Chicago to Dallas is averaging $2.48 over the past seven days, up 28.4% YOY; the backhaul from Chicago to Los Angeles is at $1.57, up 26.6% YOY; Chicago to Seattle is averaging $1.96, up 20.2% YOY. 

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John Paul Hampstead, Associate Editor

John Paul writes about current events and economics, especially politics, finance, and commodities, and holds a Ph.D. in English literature from the University of Michigan. In previous lives John Paul studied Shakespeare in London and Buddhism in India, but now he focuses on transportation and logistics in the heart of Freight Alley--Chattanooga. He spends his free time with his wife and daughter herding cats, collecting books, and walking alongside the Tennessee River.