This sound is generated automatically. Let us know if you have any feedback.
Dive Brief:
- Contract replacement rates are falling somewhat faster once again, falling 7.3% below previous contract rates in recent two-week periods, according to DAT Freight & Analytics.
- Those dry truck replacement rates, tied to new prices in routing guides, experienced double-digit declines for much of 2023, but began to slow toward the end of last year.
- Now, new contract rates are dropping closer and closer to double-digit territory, DAT principal analyst Dean Croke said in an interview with Trucking Dive.
Dive Insight:
Accelerating contract replacement rates suggest there is still excess capacity in the market, both in contract and spot markets; Croke he said earlier this month.
Carriers seeking to maintain market share have slashed fares and, while capacity has declined, excess capacity still leaves fleets struggling.
This comes as first quarter volumes are down a lot. While this reflects normal seasonal trends, there are historically low levels of spot volume, Croke said.
“The load-to-truck ratio was kind of at some of the lowest levels we’ve seen in maybe five or six years for all types of equipment,” he said.
At the same time, more shippers are moving to exclusive arrangements to control costs, Croke noted. Carriers such as Schneider National and Werner Enterprises report Q4 increases in the ratios of their dedicated fleets compared to their total hauls.
Additionally, truckers are accepting about 95% of loads, higher than the historical range of 80% to 85%. Croke he said. This means fewer cargoes slip into the spot market for brokers to handle,
Despite the sluggishness in the market, the negative replacement rate could soon change, said DAT Head of Analytics Ken Adamo he said last week during market update.
“I would expect it to turn positive or flat sometime in the next quarter, quarter and a half,” he said.
Signs point to a turn in the commodity cycle. The spread between contract and spot prices, including fuel surcharges, narrowed from 39 cents in December to 35 cents in January, according to DAT data. Carriers are keen for this gap to converge sooner rather than later.