Trucking Markets: LAX to DAL breaks $3/mile

Trucking spot rates out of southern California and Texas are extraordinarily high as the volume growth and tight capacity in those markets drive the rest of the freight cycle. Tender rejections out of Los Angeles have topped 28%, and the average spot rate from Los Angeles to Dallas, inclusive of fuel, is $3.02/mile over the past seven days on Truckstop.com.

The upward action in tenders, rejections and rates is being driven by the fundamentals of the freight market and represents a cyclical inflection rather than a mere seasonal pattern. As such, we expect these conditions to prevail through the rest of this year as freight is given back to shippers and repriced and relationships between transportation providers and their customers are reshuffled.

The artificial shortage of student drivers due to the closure of driving schools during the pandemic and the Drug and Alcohol Clearinghouse will make it more difficult for trucking capacity to enter the industry, in our view.

We’re also approaching peak hurricane season. Hurricane Laura is forecast to make landfall near Port Arthur, Texas, as a Category 3 storm early Thursday morning. A shift westward in Laura’s path would put the storm over warmer waters for longer and put Houston at risk. Historically, tropical cyclone activity in the Atlantic Basin reaches its peak in the second week of September, so we have some way to go before we’re out of the woods.