The truckload market is most definitely transitioning to a much looser state, but there are stages of freight market easing and we are only just now getting close to finishing the first one — contract compliance.
Calculated profit margins are more like margins for error as there are a number of unexpected things like traffic and detention that could impact the profitability of the load before it is delivered.
Most of the upward rate pressure of the past year and a half has arisen from the incoming offers of shippers and brokers who offer rates higher than the carrier may need.
The tender acceptance/rejection is a single decision point instead of the multiple that are included in rates, making it much faster and cleaner.
Rejection rates for van freight fell from 19% at the start of March to 12.5% by month-end, meaning there was still a good portion of freight that potentially fell to the spot market.
Contract rates , not including fuel, have increased roughly 21% over the past year, according to FreightWaves’ $80 billion-plus database of invoice data, a figure well above the inflation rate.
The rejection rate indicates that carriers have simply covered more loads under long-term agreements as the market has settled.
If this occurs, it will accelerate the cycle as both large and small carriers are forced to drop rates quickly.
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.