Dive Brief:
- Contract replacement rates are falling somewhat quicker once again, dropping 7.3% lower than previous contract rates over recent two-week periods, according to DAT Freight & Analytics.
- Those replacement rates in dry van, linked to new rates in routing guides, faced double-digit declines for much of 2023 but began slowing toward the end of last year.
- Now, new contract rates have been declining closer toward double-digit territory, DAT Principal Analyst Dean Croke told Trucking Dive in an interview.
Dive Insight:
The acceleration of contract replacement rates suggests that there’s still excess capacity in the market, both across contract and spot markets, Croke said earlier this month.
Carriers seeking to hold market share have dropped rates, and while capacity has fallen, overcapacity is still leaving a drag on fleets.
That comes as Q1 volumes are way down. Although that reflects normal seasonal trends, there are historically low levels of spot volume, Croke said.
“Our load-to-truck ratio was sort of at some of the lowest levels we've seen in in maybe five or six years for all of the equipment types,” he said.
At the same time, more shippers are moving to dedicated arrangements to control costs, Croke noted. Carriers such as Schneider National and Werner Enterprises reporting increases in Q4 for the proportions of their dedicated fleets compared to their overall trucking operations.
Additionally, truckload carriers are accepting roughly 95% of loads, higher than the historical range of 80% to 85%, Croke said. That means fewer loads are slipping onto the spot market for brokers to handle,
Despite sluggishness in the market, the negative replacement rate could soon shift, DAT Chief of Analytics Ken Adamo said last week during a market update.
“I would expect that to turn positive or flat sometime in the next quarter, quarter-and-a-half,” he said.
Signs are pointing to a turn in the freight cycle. A difference between contract and spot rates, including fuel surcharges, narrowed from 39 cents in December to 35 cents in January, per DAT data. Carriers are eager for that difference to converge sooner rather than later.
