Trucking markets: Conditions ease but carriers retain pricing power

Most trucking markets in the United States are stable or slowly cooling in terms of volumes, available capacity and spot rates. Rates out of Los Angeles in particular have been flat to down for a month. We view this as a mid-cycle pause rather than an inflection in market fundamentals for a few reasons. First, tender rejections are still very high — and so are spot rates. We haven’t seen precipitous declines in either of those metrics — nothing to signal that trucking capacity is abundant once more. Second, the wide divergence in spot rates based on destination, not origin, indicates that carriers are retaining their pricing power. We discuss the example of LA to Las Vegas and LA to Stockton in our Trucking Spot Rates section below; suffice to say that carriers have been able to maintain a high premium on lanes into unattractive markets relative to lanes into attractive markets. Finally, shippers are raising contracted rates, tendering loads at higher prices and finding transportation providers willing to service their freight. In other words, flat spot rates and flat tender rejections should be read as signs that shippers have changed their behavior and transportation providers are capturing more top-line revenue.