Transportation Club of St. Louis
“My thoughts on Spot Trucking Rates”
We have made the turn on the second half of 2019, so it is time for another Al’s Corner
Note for August 2019.
Cardinal Night---for $99 you will get an open bar, buffet, and a ticket for the 6:45 start time for the game. This year we have a limited amount of tickets, 55, due to the increase the team installed this year. This event is always a blast so get your tickets early! As I write this note we have around 20 tickets left.
Dismal Trucking “Spot Market Rates” Update—it looks as though the rates will remain in the tank for the next 6-9 months. This will continue to cause many Over-the-Road carriers who live on Spot Market rates to close their doors over time and push many drivers out of this industry as the pay is low. The trucking rates drop have been a big help to shippers, at least the ones that are keen enough (understand the history cycles) to take advantage of this “shipper’s market.” I mentioned this last part as many shippers, after getting hammered in 2018, have honored the Contract Rates, or Bid Rates that were put in late last year. The thought behind this is noble. For your Asset based carriers this makes sense, but for the most part Brokers live in the Spot Market world.
Here is my take on what happened to cause the rates to soar in 2018.
*Huge Hurricanes----both the Houston, and the Gulf Coast Storm caused distribution patterns to get messed up big time.
* The Economy Continued to Grow and Be Strong---this caused demand for equipment to out-pace supply (more loads than trucks).
* The huge growth in On-Line Shippers caused more demand to get drivers
* Truck Driver Pay had not been high enough to attract new drivers, of retain drivers. So, there were more loads than trucks, so that drives the rates higher. Supply and Demand!
* Older drivers leaving or retiring and younger drivers not picking up the slack
I put that in the simplest form I could, but I realize other factors were in play.
So why have the rates dropped over 30% this year?
I will say I was surprised that the rates would drop like they did. Why?
* It was thought that because of a Nation-Wide Truck Driver shortage rates would stay high.
* This would mean that Trucking companies could not grow their driver pool.
* All the experts were wrong (including me), that the driver pool could be expanded.
Many smaller independent carriers did add drivers and equipment. Big ones did too! The Equipment sales of tractors and trailers exploded across the country. This is the way the cycle has always went. Rates went up to the carriers, carriers would add more drivers and equipment in order to make more money. New drivers either entered or re-entered the industry. Then when too much equipment was available the rates would tank. I thought that carriers had learned that lesson. But the new, owners (the past 10 years) did not know this trend, had never seen it before, and they added lots of drivers. Drivers did jump on the bandwagon with the thought that they could make a great living. Plus, I think the economy has slowed a little (totally my thought). Then…. the bottom fell out.
So that is my long-winded update on rates.
Have a great month,
AL Hursey, President - Giltner St. Louis