FTR reports that June 2nd-8th, week 23 of 2018, was the tightest spot market ever. The ratio of loads available to trucks available in the Truckstop.com system, called the Market Demand Index, was 77.7 to 1. The previous high was 61.9 in week 14 of this year. To put these numbers in perspective, the five-year average is 23.8 for week 23 and 17.5 for week 14. The imbalance in the spot market was more than three times the usual imbalance.
The Market Demand Index measures the ratio of loads posted on the Truckstop.com load board vs the number of trucks that have posted availability. It is a relative measure of capacity tightness in the spot market. The higher the figure the tighter the market = better for carriers (i.e. pricing), the lower the figure the looser the market (more capacity relative to demand) = better for shippers (availability of capacity and pricing).
Although market conditions are driving the degree of imbalance, the Commercial Vehicle Safety Alliance’s International Roadcheck is behind the timing of the peak, says Avery Vise, FTR’s Vice President of Trucking Research. International Roadcheck is an annual three-day period of intensive inspections in early June, and the specific dates are always announced weeks in advance. In 2017, violations reported to the Federal Motor Carrier Safety Administration’s Motor Carrier Management Information System were 34% higher during the week that included International Roadcheck than the weekly average for all of 2017, according to FTR’s analysis.
Barring extreme situations, the MDI peaks each year either in week 22 or week 23, during International Roadcheck. Because so many commercial truck drivers take time off that week, shippers must turn to the spot market in unusually large numbers to find trucks to move their freight. So the spot market get a double whammy of fewer trucks available and more shippers posting loads at the same time.
Week 23 broke the record for the highest rates ever on Truckstop.com’s load board. Rates, excluding fuel, rose to $2.37. However, this record was broken again in week 25, and spot rates on the Truckstop.com load board likely will peak again in the next few weeks.
The week 23 rate is only 3% higher than the previous week, but nearly 25% higher year-over-year.
Posted loads were up 33% in week 23 from the prior week. Over the past four years, that increase has averaged 32% during International Roadcheck week.
The spot market generally is much hotter than usual, so on an absolute basis Truckstop.com had the biggest weekly gain in volumes for a Roadcheck week – an increase of 662,000 posted loads.
The calendar artificially inflates the weekly capacity change because Memorial Day typically reduces capacity by about 14%, which is exactly what FTR saw in week 22 of this year.
The week after Memorial Day there is typically a small but notable uptick on truck capacity.
This year capacity declined further – something FTR hasn’t seen in its 10 years of tracking the spot market.
Avery Vise commented, “We are seeing a dynamic similar to 2014 when we had a strong freight market combined with a regulatory change that hurt driver productivity.” Today, that change is the electronic logging device mandate; in 2014 it was changes in the 34-hour restart in hours-of-service regulations – changes that soon were blocked by Congress and ultimately repealed. The market simply is much tighter today, Vise says. For example, over the last 10 years we have averaged an increase in truck availability of 7% after Memorial Day. This year we saw a decline of 1%. “The freight transportation industry is generally well suited to handling a growing economy. However, when coupled with regulations that impact driver productivity, the increased loads and declining capacity presents major challenges. We expect these challenges to remain throughout 2018.”