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May 13, 2021 12:00 PM, EDT

Loads Increasingly Shifting to Spot Market, DAT Data Shows

DAT mobile appOn the DAT network of load boards, carriers can search for freight and lock in the rate on their mobile or desktop device. (Truckstop.com)

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An increasing number of loads are shifting onto the spot market amid tight conditions in trucking.

DAT Freight & Analytics highlighted the trend in its Trendlines report for the week ending April 11. The spot load posts within its network have increased since that time and remain exceedingly high compared with past years for the week ending May 9.

“Spot market load posts for dry van, flatbed and [refrigerated] was 36% higher than this time in 2018,” Dean Croke, principal industry analyst for DAT, told Transport Topics. “Load post volumes were seven times higher than this time last year. So we’ve had an incredible shift to the spot market.”

Dean Croke

Croke

DAT spot load posts saw a week-over-week increase of 15.4% for the week ending May 9. That represents a stark turnaround from the March-versus-April numbers, which declined 4.3%. But spot truck posts fell 14.7% from the week-ago period and 17% from the same time last year.

“We know anecdotally that carriers are still rejecting about a quarter of all loads on the contract side, and that is what’s heading to the spot market,” Croke said. “It’s a shift because capacity is tight. There’s more loads being posted in the spot market because of the imbalance in the freight market. Networks are out of balance; there’s more deadhead miles, more trucks are running with less.”

DAT usually sees about 12% to 15% of freight moving on the spot market, but now it’s closer to 25%. Part of the reason is how much capacity is being utilized. Croke noted that many shippers have been prioritizing being on time over having full trailers as they rush to rebuild retail inventories and meet online sales demand.

“We track tender rejects and whenever we start seeing spikes in that, that typically means that drivers are moving to the spot market,” Glenn Jones, global vice president of product strategy at Blume Global, told TT. “Especially if they’re doing a reject two weeks in advance.”

Jones added another indicator of possible spot market activity is requests for quotation (RFQ). That’s when a company requests a quote from a supplier for the purchase of specific products.

“That’s the other way we can tell when there’s an uptick in the spot market is when we have to do more of these RFQs,” Jones said. “I would say for tender rejects and RFQs, we’re probably up maybe 5% or 10% above normal. Normal being 2018 or 2019.”

Glenn Jones

Jones

Blume Global started seeing an uptick in drivers shifting to the spot market starting in mid-2020 and into 2021. But rather than increase even more above that elevated level, it has remained fairly steady. Jones noted that may be because of the customer base. Blume Global customers tend to be freight forwarders that try to lock in drivers early.

“Looking at the market in general and looking at load counts, what we try to do is strip out the normal seasonal effect for both national load and in particular regions from the broader sort of industry cycle,” Peter Frys, the vice president of operations and analytics at digital freight provider Flock Freight, told TT. “We have seen, probably really starting in mid-February after the shutdown with the storm, just an escalation of loads that are coming into the spot market.”

Peter Frys

Frys

Flock Freight deals with truckload brokerage and over-the-road. But the bulk of its customers are in volume less-than-truckload. Frys noted the shift to the spot market has been well above what is seasonally expected and is showing up when it comes to his customers and external market indicators.

“If I were to look at some of our customers that ordinarily move a lot of freight through contracts, whether truckload or LTL contracts, and how much of that we’re now seeing coming through as a spot freight,” Frys said, “that’s difficult to compare year-over-year because we were in the throes of the pandemic this time a year ago.

“But if I were to say versus January, which was probably the closest thing that we’ve seen in the past 12 plus months to being a soft market, I’d say freight that’s ordinarily contracted with primary carriers, we’re seeing as much as 50% more going to spot.”

BluJay Solutions monitors primary tender acceptance and spot market premiums to get a sense of how strained the market is.

“What we’ve seen really going back to early Q3 of last calendar and into this year is a lower primary tender acceptance,” Bill Madden, BluJay group vice president of logistics as a service, told TT. “I think a big driver of that change and primary tender acceptance is the current spot market premiums hovering just north of 40% compared to what that carrier might expect.”

 

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