The rate of decline in contracted truckload volumes is slowing, while brokers slash spot rates to carriers, widening their margins on fewer loads.
The good news is that the parts of the economy that need to be shut down have, for the most part, already been shut down. We think that any significant further downside risk will come from credit and business risk as many shippers, perhaps especially retailers, undergo financial stress-tests like they’ve never seen.
That financial stress has already brought negative volatility into contract rate markets: we’ve seen emails from retailers asking their contracted carriers for 15% rate cuts.
At this point it’s perhaps unnecessary to point out that very low rates and very low volumes will accelerate the exit of trucking capacity from freight markets. The highly fragmented lower end of the trucking industry, consisting of small carriers with 6 or fewer trucks, will be ineffectively served by federal economic relief measures, in our view.
There is some evidence that as volumes have pulled back, available freight is becoming more concentrated in the five or six largest outbound markets in the country, which makes sense given how widespread demand growth was in last month’s rally.
We will follow up on the concentration hypothesis in Friday’s Special Topics report.
You have selected content that's only available to members of FreightWaves Passport. As a member, you gain immediate access to the most in-depth and informative freight research available. It's your gateway to continuing education.
Members also get:
Access to exclusive community dedicated to discussing the most important challenges facing freight.
Monthly and Quarterly Freight Market reports keeping you informed of industry trends.
Much, much more!
Click below to learn more and sign up today!
Existing Passport subscribers may log in using the form below.
John Paul conducts research on multimodal freight markets and holds a Ph.D. in English literature from the University of Michigan. Prior to building a research team at FreightWaves, JP spent two years on the editorial side covering trucking markets, freight brokerage, and M&A.