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DAT Confirms May Drop In Spot Volumes And Pricing

DAT Confirms May Drop In Spot Volumes And Pricing

The truckload spot market experienced another month of softness in May, confirming recent commentary that normal seasonality isn't taking shape.

DAT Solutions, which operates the largest truckload freight marketplace in North America, confirmed that spot market truckload dry van loads declined 12 percent in May compared to April and were 10 percent lower year-over-year. Refrigerated volumes declined 8.3 percent versus April, down 12 percent year-over-year and flatbed volume was down 9.3% sequentially, 3.1% lower year-over-year.

The report called out trade tensions with China and weather (record rain, flooding and tornadoes) as the primary culprits. Further, the report said that agricultural shipments were delayed or destroyed due to inclement weather.

"Simply put, May was a disappointment in terms of load counts. We're accustomed to seeing higher volumes of retail goods, fresh produce, construction materials and other seasonal spot truckload freight moving through supply chains at this time of year," said DAT Senior Industry Analyst Mark Montague.

This is a bit of a change from DAT's April report, which called for "regional capacity shortages to emerge and boost rates higher through the end of the second quarter."

The demand weakness, as well as the excess capacity in the market from record 2018 truck deliveries, weighed on spot market rates in May.

The national spot van rate was flat in May compared to April at $1.80 per mile, but 16.3 percent lower year-over-year. Refrigerated rates were $0.01 per mile higher month-over-month, but 15 percent lower than May 2018 at $2.15 per mile. The average flatbed rate was down $0.05 per mile sequentially in the month and down 16.5 percent year-over-year at $2.27 per mile. These rates are inclusive of fuel surcharges.

"After a lackluster May, June is shaping up to be a pivotal month for trucking. We will know soon whether the volumes we expected in May were simply delayed. If so, the pent-up demand could boost seasonal volumes at the close of the second quarter," Montague said.

Some of that seasonality may finally bleed through, as both spot volumes and pricing have improved modestly in recent weeks (as seen in the Outbound Tender Volume Index and the DAT Van Freight Rate Index). June is historically the best month of the year. That said, seasonal demand remains muted and declines in pricing reflect a capacity overhang. Further, recent tariff rhetoric related to Mexico and the potential for another increase in Chinese tariffs may have provided the spot market a near-term catalyst. In any event, May was representative of an imbalance in the spot market.

Outbound Tender Volume Index (USA) – SONAR

DAT Van Freight Rate Index (National U.S. Van) – SONAR

Additionally, no company had positive commentary on current TL freight fundamentals at a pair of investor conferences a week ago.

Schneider National, Inc. (NYSE: SNDR) said that it has been disappointed by the lack of seasonal improvement in demand in the second quarter and pointed to June as a make or break type month for not only the quarter, but potentially the rest of the summer.

Landstar System (NASDAQ: LSTR) negatively revised earnings estimates for the second quarter 2019. The freight broker cited low double-digit range truck revenue per load declines for the first two months of the quarter versus its prior expectation, which called for high single-digit declines. The volume weakness was more muted, down 1 percent year-over-year for both April and May.

At the same conference, Werner Enterprises, Inc. (NASDAQ: WERN) indicated demand, while slightly improved, hasn't improved sequentially as it normally does and remains lower than the company expected.

"June is a big month in the second quarter historically…and if we don't see it here in the month of June you really have to question what we are going to see in July and August," said Schneider's Chief Executive Officer, Mark Rourke.

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