Each month FTR conducts a quick poll question during our State of Freight webinars. Earlier this month, we asked about the upcoming bid season for contract freight. Bid season has become less of a season and more of a continuous process, but we still expect to see the bulk of activity begin to ramp up soon.
Whether they were a shipper, a carrier, or an industry observer – we asked where they expected rates to go during this round of bidding. The results were not surprising but does help shed some light on the potential for spot market increases later this year. Most participants (more than 50%) foresaw modest increases (from 2% to 5%) in contract pricing this spring. Another sizable chunk (nearly 40%) expect pricing to be relatively neutral (anywhere from +2% to -2%). Very few saw a market it which a big jump was likely or a modest drop should be expected. No one expects a significant decline in contract rates.
The first insight is that this is a significant improvement from one year ago. We don’t have a similar question from last year, but the actual results indicate that contract pricing for dry van freight took a sizable hit. Additionally, anecdotal comments from the time indicated that some shippers were pushing for very significant contract rate reductions.
Spot Moves First
The ramification for spot market freight comes from the fact that we know spot market pricing moves first and moves more significantly than contract pricing. Currently, spot rates (excluding fuel) are down just 0.8% in week 3. Significant y/y increases aren’t likely until we hit summer. An expectation for spot rates to increase more than 5% seems quite reasonable, and the chance for much more significant increases becomes possible as we approach the fall season and get closer to the ELD implementation date. Stay Tuned!