It was another interesting week leading into Q4. We’re waiting for the holiday season busy season to kick-off and what is interesting is traditionally October is a quiet month with shippers getting ready for the peak season to kick off in November and December and the rail and also the maritime begin to become very busy and active, and normally we see a dramatic drop during these months of September leading to October.
However this year spot rates have held their own, we saw a slight dip at the beginning of the month, and then they came back up again with a national average for full truckload spot rate being above the past years national OTR average. This means Full Truck Load OTR rates are at a very hot level for this time of the year even though two weeks ago things looked to have calmed down a little bit and freight rates did take a small drop, they didn’t continue to fall.
We fully expect the rates to continue to go up during Q4 and we expect spikes to take place as current capacity continues to be tight.
With bad weather in certain places and higher demand, this is truly a strong as a position for carriers to be in leading into the end of year peak season.
When we look at the sea freight data, the numbers of imports are still high, there has been no stoppage of the flow of inbound imports to the United States by sea and there seems to be no slowing down at all with ports such as Los Angeles continuing to compete for capacity.
We also have another hurricane. Hurricane Delta made landfall near Creole, Louisiana early Friday evening with nearly 11 million people in its path before weakening to a tropical storm early Saturday. While Delta’s effect on local supply chains could be significant, the impact on trucking and other modes of freight transportation appears minor to moderate. Hurricanes cause many carriers to stay out of these zones waiting to go back in once the storm passes, this again squeezes capacity in certain areas at certain times causing difficulty for shippers and 3PLs brokers to gauge rates.
We also have to wait to see what happens after these hurricanes hit, with demand for trucks to move materials and goods and also emergency services to go into these areas again putting more pressure on capacity.
However saying this, hurricanes have not been the main impact on freight and capacity this year. The freight market realistically has not needed any help from natural disasters. Covid-19 related disruptions have provided the underlining fundamentals to support higher rates to continue to increase, and the storms have literally just added on top.
CARRIERS ARE FEELING AND LOOKING A LOT MORE OPTIMISTIC.
Carriers are having a difficult time keeping up with all of this capacity demand and we are now looking at carriers to see what they are going to do to meet the growing demand. With higher demand, means higher revenues for carriers, and we expect all signals are good for carriers right now. Revenue is up per week and operational revenues have been improving for many months, and so we need to see more new truck orders and drivers on the roads.
We must look at carriers to start reinvesting and replenishing their fleets and we may even see driver salaries going up to meet the demand. However, carriers need to be cautious and continue to manage their costs and try and be as profitable as possible.
However it is challenging for many carriers and shippers, there really is a lot of uncertainty still in place in the market, for example, is this right now a lot of the goods that are moving in the market simply down to an adjustment of people working from home?
Supply chains have been readjusting their inventory levels and adding additional distribution centers to readjust their processes levels. At some point, the freight market will go back to a certain level of normal again and there will be a balance between freight volumes and truck capacity again.
At this point, shippers and carriers will be able to begin forecasting better based on the new reality because a lot of what we’re seeing right now really comes down to nobody could’ve forecast for 2020, but with Covid19, it changed the buying behavior of the public and people’s way of life especially in the demand for goods products purchased.
When we look at larger shippers who normally have extensive Q4 planning and greater and deeper collaboration with their 3PLs during normal non-Covid19 times, this year they have been in reactive mode to meet the demand that has been caused within the market to turn over inventory before peak season with thousands of loads.
Clearly, this is difficult for all shippers, 3PL, and freight brokers to find capacity as nobody really knows what consumer demand is going to be like and everyone is doing their best to just be prepared.
When the freight market does normalize again and people are able to project better we expect freight pricing to become more realistic, as these wild swings in freight rates have been very difficult to manage for shippers, 3PLs, and carriers.
Make sure you contact us if you need any assistance with moving your freight. Simply send us the freight requirements and we will do our best to find you the capacity that you need.
Thank you so much for being with us today, have a wonderful day, and stay safe.