With lower demand in the spot market shippers are starting to find efficiencies. The conditions that were once fueled by the pandemic have started to wane. Soft economic conditions are forest for the first half of 2021 which might not be ideal for carriers but it is helping create a shipper’s market.
The major carriers J.B. Hunt, HUB group, and Schneider believe that conditions will improve mid-year but others such as Old Dominion CFO Adam Satterfield are not as optimistic as they watch the market trends.
Old Dominion CFO Adam Satterfield said on a Feb. 1 earnings call, “We are starting to trend back in the right direction [on volumes]. Whether or not we get back to the full 10-year average at least in the first of the year remains to be seen.”
Falling spot rates started to occur in 2022 but the drops were far greater than projected. Ken Adamo, DAT chief of analysis believed the rates would fall 15% to 30% in 2022 but they plunged by 25% to 30% YoY. The way the plunge occurred made many believe that they had already hit the floor and would make a turn to rise soon.
DAT states, “Throughout 2021, capacity struggled to keep pace with truckload demand. Early 2022 showed signs of equilibrium, but the record number of new entrants — attracted by high rates during the pandemic peak — created an oversupplied market that pushed spot rates downward.”
2023 kicked off with many unfavorable indicators such as extra trucky capacity and data that relieved that many stores had stockpiled.
Jonathan Phares, assistant professor of supply chain management at Iowa State University states, “With a looming recession and excess inventory, we could see spot markets rate drop dramatically in the first quarter (and continue) into the second quarter of the recession hits during that time.”
Ganttt went on to say, “We’re hopeful, got our fingers crossed that we will come out of this thing as we get into the spring and later on in the second quarter
Some trucking executives forecast a spot rate recovery but currently, shippers are chomping at the bit to take advantage of the low prices and have been incorporating the savings into their strategy.
