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Freight brokers see more hot loads as carriers manage yield

(Photo: FreightWaves)

Freight brokers said in interviews this week that sustained higher volumes are now making an impact on their businesses as revenue per load and margin per load increase. Brokers reported that more ‘hot loads,’ or shipments tendered with little lead time because they have been rejected by primary carriers, are hitting their boards. 

While spot rates have not come up appreciably, the time to cover a load has grown longer incrementally. William Kerr, president of Chicago-based Edge Logistics, said that at the market’s loosest point earlier in the summer, it took his brokers an average of only nine minutes to cover a load, but now his build-to-cover times have stretched to approximately 15 to 17 minutes.

“Service failures this week have been higher and shippers have been coming back to us to ensure deliveries are met,” said Patrick Draut, senior vice president of business intelligence at Chicago-based K&L Freight.

“Some shippers we’ve been begging for freight all year have started to come around,” Kerr added.

An executive at Swift Logistics (NYSE: KNX) said he’s seeing the same thing in Swift’s network, and that load counts got “a good pop” this week.

On a year-over-year basis, national truckload volumes are up 3.81% (OTVIY.USA), and that positive level has been sustained now since the end of July. 

Those numbers track with the gradual growth that Matt Pyatt, chief executive officer at Austin-based Arrive Logistics, reported.

“Steady, but nothing crazy,” Pyatt said. “We grew load per day volume at a steady rate in September and are forecasting approximately the same growth in October.”

Dry van spot rates, on the other hand, have remained flat, except for a few lanes.

Chart: FreightWaves SONAR

Chicago to Atlanta spot rates (DATVF.CHIATL) ticked up to $2.05/mile before fuel last week as volumes in the Southeast started to dry up and markets there become less attractive to carriers, but two brokerage executives said this week that the trend may be reversing. The Deep South belt, broadly from Baton Rouge to Atlanta, is heating up, and it’s becoming less expensive to move loads into the region.

Other backhaul markets like Seattle and Philadelphia are still pulling in carriers with above-average rates. Los Angeles to Dallas, the aorta of truckload freight moving into the interior of the country, has been sideways at $1.58/mile (DATVF.LAXDAL).

The belt of Midwest markets from Fayetteville and Little Rock, Arkansas, north to Cape Girardeau, Joplin and Quincy has appreciably tightened, especially for refrigerated equipment.

In our view, the increasingly favorable conditions experienced by freight brokers are a knock-on effect of decisions made by enterprise truckload carriers. It appears that approximately 10 weeks of positive year-over-year volumes have allowed truckload carriers to achieve their desired asset utilization. Now carriers are managing yield and rotating their fleets away from undesirable freight and back toward the more profitable dedicated part of their book.

Those irregular spot loads are falling down shippers’ routing guides and finding their way to brokers at higher prices, and because spot rates are fairly static, margins are widening. 

According to Bank of America Merrill Lynch equities analyst Ken Hoexter, more and more shippers believe that trucking rates will be stable, as opposed to falling, over the next three months. 

“With respect to rates, 28% of shippers expect rates to fall, down from 30% last issue, 65% of shippers expect rates to be flat, from 60% last issue, while 8% of shippers expect rates to rise, down from 10% two weeks ago,” Hoexter wrote in a September 26 investor note. “On capacity, 53% of shippers expect capacity to increase, from 60% last survey, 43% expect fleets to remain flat, up from 33% last issue, and 5% expect capacity to contract, down from 8% two weeks ago.”

Expectations continue to remain high for retail season as consumer spending has remained a robust performer in the economy, offsetting under-investment on the industrial side. 

In a September 25 investor note Deutsche Bank equities analyst Amit Mehrotra discussed “the divergence between strong underlying consumer demand and weaker data on the industrial side (i.e. slower IP growth and ISM <50). Retail sales growth was in line with truck tonnage in August (+4.1% year-over-year) while retail imports into the major U.S. ports increased 2.1% year-over-year.”

“Strong retail sales/truck tonnage has positive implications for truckload stocks KNX and WERN, which are most closely tied to consumer spending, though all U.S. transportation companies would benefit,” Mehrotra concluded.

If enterprise truckload carriers are exercising more optionality in their freight mix – and therefore sending out of network and cheap freight to brokers – that bodes well for third quarter financial results. We will be listening closely to the earnings calls from every publicly traded transportation company to hear how the third quarter ended and how management guides for the fourth quarter.

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  1. David Tildern

    Jeremy, the good news is that technology is slowly but surely taking cost out of the system and actually INCREASING profit for those that are using it. The best carriers are using the latest technology to reduce their costs and raise their profits.

    At least today, amazing technology is available to anyone that wants to use it. It’s just up to you whether you do or not. 🙂

  2. Jeremy Brinson

    Smaller trucking companies margins are so thin due to all the hands in the “cookie jar” there needs to be some changes made.
    You have brokers telling you that they only take 10% from the top, my inside source tells at major brokerage service tells me they take a minimum of 15% and shoot for 20% on every load.
    Brokerage services have minimal overhead and huge margins, I mean they need an office some computers and a few employees and pay a power bill.. While trucking companies have 200k setups (truck and trailer) to move just one load. Then fuel, repairs, maintenance, insurance, wages, fuel taxes etc. This needs to be regulated, they are crooks! They even want to take another 5% for factoring services.
    Don’t even get me started on the companies that offer lease to own operators, they are worse than brokers.. So many things need regulated and fixed in this business!

  3. David Tildern

    Adrian, this article isn’t about brokers, really – it’s saying that SHIPPERS are pushing load volumes up at the end of September – which is great for both carriers and brokers. Even the Ascend TMS guy says this. In fact, I imagine that the shippers try to give their loads directly to carriers first, and when they run out of carriers they MUST then go to their brokers and let them scramble to cover the remaining loads at whatever price the market dictates.

    We shouldn’t complain. SMART carriers like us should also run a brokerage, too. So,, if a shippers gives you 3 loads and you only have 2 assets available, just cover the 3rd load with your brokerage department. Don’t give that 3rd load back. That’s stupid.

    We also use AscendTMS here and we run our assets and brokerage in the same Ascend software account. So, once our own assets are fully covered we just broker what’s left and make a few extra dollars. We definitely don’t give loads back. Nobody should.

  4. Dan Sokolov

    Translation: Freight Brokers sucking out very large $ amounts directly out of truckers pockets, leaving truck drivers and operators with little money barely enough to make end of month…so far this year at least 6 trucking companies shuttered leaving over 2000 drivers jobs less, while freight brokers brag about huge profits. FMCSA , DOT , OOIDA , and industry experts like you , need to come clean and admit that a change in trucking is over due. Freight Brokers needs to be more regulated, more restricted and certain brokers needs to be flat out banned, same as some trucking companies.

  5. Elvis Durant

    Yeah, Ok………. Good DESPERATE post……….Lets try this again in 2021 or 2022. DONT believe anything positive the next 20 MONTHS! Gracias!

  6. Tim Higham

    Several very large AscendTMS shippers told me this week that the reason for their extra volumes is that it’s the end of the quarter and they are trying to move inventory both to make Q3 (and month end) sales numbers and to also get the inventory out of their DCs and warehouses. A lot of this “extra” freight his hitting the brokers on the spot market (we see it in AscendTMS).

    I expect it will all calm down again in October when the mad quarter end frenzy is over. I’m sure SONAR data will show similar trends at quarter end for all modes.

    Tim HIgham
    AscendTMS (www.TheFreeTMS,com)

    1. John Paul Hampstead, Associate Editor

      Makes sense. In 2018 the beginning of October saw a big drop off in volumes (was actually the beginning of the freight recession, we just didn’t know it yet)>

Comments are closed.

John Paul Hampstead

John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.