Today’s Pickup: contract rate increases tamp down spot volatility

Good day,

The national spot market is normalizing back to post-ELD December levels, off the highs the industry experienced in an unusually turbulent January and February. We believe that major carriers by and large received the double-digit contract rate increases they asked shippers for and are now honoring their service commitments instead of going to spot freight. We don’t know how long this period of low volatility will last, but for now, the market seems to think that contract freight is still fairly priced.

Therefore even though turndowns are low and spot rate growth is weak at best, FreightWaves does not think this indicates a ‘slowdown’ in the freight market. Rather, shippers have increased contract rates to tamp down spot market volatility, and carriers—so far—are working with them. Demand remains high and capacity is still tight: those market fundamentals have not substantially changed.

Did you know?

According to Intercomp data, in 1985 there were six weight-related citations for every 1,000 pullovers. That rose slightly to seven by 1995, but by 2008, as WIM technology was starting to be rolled out in various applications, it rose to 13. By 2012, it had dropped back to 10. 


“Without a doubt the capacity crunch is at unprecedented levels.”

-Alex Perry, Data Analytics Consultant for DAT, speaking at TIA

In other news:

Better than Amazon? How Bradley Jacobs turned a $63M bet into a $12B transportation empire

The 61 year-old CEO of XPO Logistics talks jazz piano, acquisitions: “Music is really business. …You have to be using all of your senses at the same time, and you have to be dancing with the circumstances and evolving.” (Forbes)

COSCO takeover of OOCL threatened by China-US trade spat

According to a report by Alphaliner, the main issue is OOCL’s Pier E/Pier F Long Beach Container Terminal, which would pass to the Chinese in the deal. The state-owned Chinese group already has controlling interests at two other terminals in the Los Angeles-Long Beach San Pedro Bay port complex. (The LoadStar)

China’s Xi renews vow to open economy, cut tariffs as U.S. trade row deepens

Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products like cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States. (Reuters)

Will weak container spot market end bull run for transpacific contracts?

A top-heavy delivery schedule and sluggish demand may force shipping lines to lower 2018 transpacific contract rates. (Hellenic Shipping News)

Teamsters’ rail conferences seek NAFTA improvements

The Teamsters’ rail conferences in the United States and Canada yesterday joined with unionized Mexican freight-rail workers in calling for fair and equitable treatment of all industry workers under a revamped North American Free Trade Agreement (NAFTA). (Progressive Railroading)

Final Thoughts:

Andrew McAfee from the Initiative on the Digital Economy at MIT offered some insights on leadership, management, information processing, and decision-making at MODEX in Atlanta yesterday. McAfee said that too often important decisions get made by HIPPOs (Highest Paid Person’s Opinion), whose status gives them misplaced confidence in their ability to go with their gut. Hippos clash with ‘geeks’, lower-status information workers who make arguments based on data that can contradict the hippo’s strategy and threaten their egos.

McAfee cited a study that was essentially a look at the Geek vs. Hippo approach and found that the latter contributed little, about half the time was neutral and lot of the time was a hindrance. “The conclusion is that we need to make Hippos an endangered species when it comes to getting work done,” McAfee said, noting that the study in question a few years old and would have based its conclusions on a period when companies made decisions on the basis of “small data” rather than the big data of today. Big data would favor geeks even more. Read the whole story here on FreightWaves.

Hammer down everyone!

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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.