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Spot market carries momentum from Thanksgiving into December

Trucking market has seen unseasonable tightness since Labor Day

Photo: Jim Allen - FreightWaves

Chart of the Week: 7-Day Average Van Rate Per Mile – USA, Van Outbound Tender Reject Index – USA SONAR: TSTOPVRPM.USA, VOTRI.USA

With truckload services going for a premium on the spot market since Labor Day, it has been difficult to discern where and when there has been opportunity to negotiate lower rates. Looking at the chart comparing’s average van rate for its top 100 lanes and the national Outbound Tender Reject Index for van load requests, there has been a small divergence this week as spot rates remained elevated after rejections fell. This shows that many may have missed an opportunity to ship for less. 

There is a pretty clean connection between tender rejection rates — the rate at which carriers turn down load requests from shippers — and spot rate movement. Carriers typically want to service their customers as much as possible, but when they more frequently decline requests for capacity — tender rejection rate increases — it typically means their services are in high demand. 

The trucking spot market, like many financial markets, is a great place to judge the well-being of the trucking industry over time but can be difficult to use and understand on a daily basis. This is due to the fact many carrier pricing analysts (like me) and brokers will try to maximize their margins. If they are feeling confident, they push the upper limits of the ask price. Conversely, when their backs are against the wall, they sometimes push rates lower than necessary. This is where pricing becomes more art than science.

Looking at the spot rate versus rejection rate movement around Thanksgiving, rejection rates increased in front of the holiday sooner, while falling the week after the holiday. Part of this has to do with discovery. 

Most analysts and brokers do not know the market is tight until they have already felt it in the form of operational feedback or failed coverage attempts. There are equally few signs when it loosens, especially when the loosening is minimal.

The story of the trucking market has been unseasonable tightness since Labor Day, which makes it an easy assumption that the market will tighten sustainably through the holidays. What many who have not worked in trucking don’t know is that capacity tightens more around the holidays because there is less driver availability. 

This is a short-term impact that only lasts for a week or so in general as drivers are put into position to be at home or on vacation, which limits their load options. They typically get back on the road when most of us return to the office — or home office as many of us have come to enjoy this year. Meaning, the supply side contraction mostly ends the week after Thanksgiving after drivers get rolling again. 

Market transparency is not the only reason for some disconnect between spot rates and tender rejections. Service requirements also play a role as many spot loads become a way for shippers to guarantee higher levels of service. Service becomes increasingly important for many shippers this time of year regardless of freight demand. 

Tender lead times jump in front of holidays as shippers try to lock in capacity after the break ends. Chart: SONAR = TLT.USA

There is also a lag in reporting spot rates as most are counted after the load has been accepted or invoiced, whereas load tenders are counted at the beginning of the process. Many shippers will increase lead times — the difference between tender submission and requested pickup — in order to help them lock down capacity with a carrier. This means most tenders are visible two to four days prior to their movement. 

The current indication is that many were paying Thanksgiving premiums on rates this past week that did not have to. 

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.

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Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also one of FreightWaves’ Market Experts. With a degree in Finance, Strickland spent the early part of his career in banking before transitioning to transportation in various roles and segments, such as truckload and LTL. He has over 13 years of transportation experience, specializing in data, pricing, and analytics.