Truckload’s mixed signals

The truckload market is showing contradictory signals, with rising spot rates but a decline in accepted tenders. The Accepted SONAR Truckload Volume Index (ASTVI) USA fell nearly 3% in a week to 9,574, below its 12-month average. Meanwhile, the National Truckload Index (NTI) soared to $3.53 per mile, 10% above its late-August low and 50% higher than last year's figure at this time.

Spot rates are climbing quickly, but the volume of contracted loads carriers accept has dropped. This situation of declining accepted tenders paired with rising spot rates is unusual, typically seen only during major holidays when drivers take time off and spot rates climb. However, rejection rates have also fallen alongside accepted tenders, suggesting demand may be easing.

The timing of this divergence between contracted tenders and spot rates may be contributing to the mixed signals. Tenders are placed three to four days ahead of pickup, while spot loads have less than two days of lead time, causing tenders to move ahead of spot rates. However, this gap in timing has persisted for a significant portion of September.

Another possibility is that rejection rates haven't eased enough to bring down spot rates, which are still too high for most shippers to be comfortable at 13.8%. Rapidly increasing diesel costs could also be a reason for the disconnect between spot rates and rejection rates. Fuel prices aren't always closely tied to spot rates, as capacity levels often outweigh changes in operating costs.

Spot rates rose in June while retail fuel prices fell, then fell in July while fuel costs rose. However, fuel prices surged sharply in September, straining carriers' cash flow as expenses rise before revenue catches up. Carriers are often not paid until after delivery, leading to delays in cash availability. Despite demand slipping, carriers can still pass fuel cost inflation through to shippers due to tight market conditions allowing rates to rise.

This tight market may not necessarily indicate a tighter market; it suggests operating costs are rising and current market conditions allow rates to rise.