FREIGHT FOCUS20 20

Planning for the year ahead doesn’t take a crystal ball, but it does help to start with a rearview mirror. We typically look for clues from the past 12 months that offer insight into the next 12. Those clues are less obvious this year, though, because 2019 sent a flurry of mixed signals.

There were the negative signs: Air and sea cargo were down, railroad volumes were subpar, and manufacturing slumped. On the positive side, truckload freight increased 4 percent year over year, and the spot market grew even faster. Dry van freight volumes were especially strong.

Capacity drives rates

But while trucking volumes rose, rates dropped sharply. Many people see 2018 as a peak year for trucking, but that was true only for pricing, not volumes. That’s because spot rates rise and fall with the availability of capacity, and contract rates follow spot trends.

In 2018, capacity was constrained by the ELD mandate and major hurricanes. At the same time, demand grew with the improved domestic economy. That demand quickly outpaced capacity, and rates skyrocketed.

With the extra revenue, motor carriers invested in

higher driver compensation and record numbers of new truck orders. Those moves expanded capacity, which pushed truckload rates back down in 2019.

When’s the next rebound?

Capacity has been exiting the marketplace, however. More motor carriers closed their doors in the first half of 2019 than in all of 2018, according to the US Bank Freight Payment Index. In December, carriers currently operating AOBRDs are also required to switch to the more restrictive ELDs to track hours of service.

Those factors should further constrain capacity, as truckload demand continues to trend upward. That means freight rates may have hit bottom already.

In this cyclical market, we expect the next rebound to take effect by mid-2020.

HINDSIGHT IS 2019

INSTANT INSIGHTSDAT is the central hub for truckload freight, with data and insights that allow transportation professionals to respond in real-time to changes in volumes, capacity, and pricing.

Railroad Freight

Ocean Freight

Air Freight

4%

16%2%

7%

2019: A YEAR OF MIXED SIGNALS

The trucking industry, however, saw growth.

Declines in key sectors of the industry.

Increase in CONTRACT

Decrease in CONTRACT

Increase in SPOT

Decrease in SPOT

TRUCKLOADVOLUMES:

Source: DAT Truckload Volume Index

Source: DAT RateView

Source: Bureau of Transportation Statistics

MULTIMODALMALAISE:

Freight rates did not keep pace.

DRY VANRATES:

A Closer Look: DAT Spot Market Van Rates

What should we expect in 2020? For one, truckload shipments will cost more.

Capacity drives truckload prices, and since truck availability is expected to be more constrained in 2020 compared to 2019, we anticipate spot market rates to rebound after a down year.

Spot market van rates should bounce back 4-6% in the second half of 2020, according to DAT data scientists. Contract rates lost 2% from the huge gains in 2018. Those prices should climb, again in 2020. Expect around a 2% increase in contract rates next year.

Of course, a number of factors could change that trajectory. For starters, 2020 is a presidential election year, which adds an extra layer of uncertainty.

FREIGHTFORECAST

Increase in CONTRACT RATES in 2020

2%

JAN '16 JAN '17 JAN '18 JAN '19 JAN '20$1.00

$1.25

$1.75

$1.50

$2.00

Actual National Average Rates 2019 Projected Rates 2020 Projected Rates

Avg

Van

Rate

with

Fue

l Sur

char

ge

© 2019 DAT Solutions

Increase in SPOT RATES in 2020

5%

DAILY SNAPSHOTSThe forecast is based on a series of daily snapshots captured over 5 years.

PROVEN MODELSBased on recent trends which projects next year’s rates, day by day.

COMPUTER LEARNINGAI matches recent trends against a series of sine and cosine curves for best fit.

PREDICTION PROCESS

REAL INVOICESDAT collects data on $65 billion in freight invoices.

Transportation is undergoing a technological transformation. There’s no reason to expect the rate of change to slow. E-commerce continues to grow around 15 percent per year. That creates more demand for trucks as supply chains continue to find new ways to adapt to the prioritization of speed over asset utilization.

Uncertainty continues to roil supply chains while we wait for a new trade agreement with China. Plus, there’s reluctance to invest in domestic manufacturing until things settle down.

Even a small change in oil field activity can have a big impact on trucking, especially flatbed. Investment continues, but drilling slowed in 2019, with 10 to 12 percent fewer active wells than last year.

TECHNOLOGY

CHINA TRADE OIL AND GAS

The driver population continues to age, and stricter anti-drug enforcement is coming. That could shrink an already shallow pool of available drivers. The last fleets are also transitioning from AOBRDs to the more restrictive ELDs for logging hours of service, which can cut into productivity.

DRIVER AVAILABILITY

Any number of disruptions could alter our projections – especially weather – but these are four major factors to consider in 2020.

2020 FORESIGHT

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