January 8, 2016 10:15 AM, EST
New Index Signals That Shippers Could Gain Upper Hand in Rate Talks

A newly released index of trucking rates shows the gap between declining spot freight rates and contract pricing is continuing to widen, providing evidence that shippers could have the upper hand in negotiations over long-term freight rates in the months ahead.

The latest reading in the Chainalytics-Cowen Monthly Truckload Index, measuring the relationship between spot and contract rates, showed that spot dry van prices were 3.2% below contract rates on a relative basis, the largest gap in the 12 months measured so far by the index. It is based on freight bill payment data in the tens of billions of dollars from 230 freight shippers and brokers that is collected and analyzed by Atlanta-based Chainalytics.

A baseline for the index was created by assessing spot and contract prices beginning with the week ended Nov. 30, 2014. In the intervening 12 months, spot market prices rose as much as 5.2% faster than dry van contract rates on a relative basis, staying above contract prices until July, when the pricing trend began to shift.

“Our new indices suggest that the gap between lower spot rates and higher contract prices, which in many cases date back to negotiations that took place 12 months ago, continues to widen,” Cowen & Co. analyst Jason Seidl said in a report. “Shippers are clearly in a better position today than they were during the 2015 bid season. The implications are significant as discussions between brokers, truckers and shippers heat up.”

The Chainalytics-Cowen index also measures temperature-controlled freight trends, where the trend was the same, but the gap between spot and contracts was even wider.

The most recent reading showed spot prices 6.5% below contract rates and a peak of 13% higher spot prices late in 2014.

One of the effects Seidl cited was the ability for brokers to improve their profit margins in times when the index shows a large gap between contract and spot prices, since the third parties can use their expertise in those situations to capitalize on matching buyers and sellers of freight.