DAT Truckload Volume Index trends down in February

Data recently issued by Portland, Oregon-based freight marketplace platform and information provider DAT, a subsidiary of Roper Technologies, for the month of February, in its DAT Truckload Volume Index, pointed to expected declines for truckload rates and volumes for dry van refrigerated (reefer), and flatbed equipment, following a decent January.

The DAT Truckload Volume Index reflects the change in the number of loads with a pickup date during that month, with the actual index number normalized each month to accommodate any new data sources without distortion, with a baseline of 100 equal to the number of loads moved in January 2015. 

“Ocean and air cargo was affected immediately by the coronavirus-related cutbacks,” said Peggy Dorf, Senior Market Analyst at DAT Solutions, in a statement. “That will certainly affect truckload freight later, but for now carriers are busy helping retailers restock empty store shelves.”

DAT noted that February’s decreases were in line with seasonal trends, while not “necessarily attributable to factory closures during the COVID-19 coronavirus outbreak in China.” And it added that import traffic was already in decline, due to a scheduled lull for Chinese New Year, with the gap in traffic extended longer than expected, truckload demand in West Coast markets will be more likely to rebound slowly.

DAT’s data found the following takeaways for February:

• including fuel surcharges, spot van rates averaged $1.79 per mile nationally in February, down 8 cents from January and 9 cents from February 2019;
• at $2.10 per mile, the national average reefer rate lost 14 cents compared to January and fell 11 cents from February 2019;
• national average flatbed rates dropped 2 cents month over month to $2.15 per mile, an 18-cent decline from February 2019;
• volumes fell 7% for both vans and reefers month over month, while flatbed load counts edged down 3%; and
• compared to February 2019, however, volumes increased for all three equipment types: vans gained 10%, reefers added 11%, and flatbed volume rose 4%

In an interview, Ken Adamo, Chief of Analytics at DAT, said that February started off slowly, with January “bleeding” into January with slowness, with the question at the time, as it related to the initial read of the coronavirus, if it would have a deflationary impact on rates.

“At the end of February, we are watching the situation in Asia, thinking it was going to make a bad situation worse,” he said. “Things then bottomed out and jigged along the bottom in February…and served as a precursor for what was to come.”

Looking at March, Adamo explained that national dry van spot market rates are currently up 5%-to-7% through mid-month, which he called a substantial increase, given where things are seasonally from an overall rate climate perspective, and are not showing any signs of letting up from an empirical perspective either.

Other contributing factors he cited included declining diesel prices and a 3.15-to-1 load-to-truck ratio (as of March 15).

“2020 is kind of closely following 2017 as a way for us to model things off of a prior year,” he said. “In the past three weeks, things have fundamentally decoupled from 2017 and shot upward. The differences between 2017 and 2018, are with 2018 arguably being the high water mark of the decade. We are not there yet, but we are maybe halfway there. The next couple of weeks will be important to watch, but what we are seeing is that will mainly be driven by load volume, and the past week was a near vertical spike in load volume for posted loads in our network and our extended network.  The working thesis is that capacity has not left the market but is being sucked up by large contract truckload shippers and are not using the spot market.”

Addressing the current load-to-truck ratio, Adamo said that it is decoupled from 2017 and operating in a space that is significantly higher than 2019 and setting its sights on 2018 levels.

“There is still a way to go, with the next couple weeks being imperative, as spring shipping and produce for reefers with produce season, so we could see a compounding effect here in the next couple weeks for load-to-truck ratios,” he said. “What is happening there is apparent on the rate side, where we are seeing unmitigated increases.”

When asked about reduced consumer demand due to the coronavirus, Adamo said that in the short term the spot market is going to be inundated over the next two weeks at least, with issues relating to getting consumer goods, like paper products, to warehouses and distribution centers.

“There is enough backlog to keep carriers busy for the next two weeks,” he said. “There is also this midterm horizon in the early summer, which is in the middle of produce season. And things like Xboxes are going to start coming across the ocean mid-summer. There are all these traditional transportation fence posts we are watching, with a focus on if coronavirus is going to bleed into Peak Season and Black Friday later this year.”

Looking ahead, when people have been quarantined for 30-plus days, Adamo said it is very unclear as to where things will stand for carriers, shippers, and brokers, calling it a hard question to answer.

“What happens between now and produce season is concerning to me,” he said. “We are kind of on the foothills of it now. We are also suffering from the reaction to trade tensions with China about a year ago, when manufacturers and retailers buffered their inventories to prepare for potential trade disruptions, which led to there being a lot of inventory to draw down from. That leads to a question of what happens to all of this freight that is backlogged that is going to land in West Coast ports in 30-45 days?”