True to history, October is off to a slow start. But don’t let your guard down. That’s going to change rather quickly.
Yes! It’s true. October is off to a slower start when it comes to over the road transportation, especially compared to 2021 levels. That said, over the road transportation is still in high demand (as we’ll see below). Many loads continue to be diverted toward the West Coast as imports make their way to distribution centers and warehouses. When capacity gets diverted to different lanes it creates ripple effects in the supply chain. Since the loads going out to the West Coast are long-haul loads, they’re going to take up capacity for a longer period of time. As a result, capacity will be tied up for longer periods of time making it harder to secure capacity for short or mid-haul loads.
As far as those over the road numbers are concerned, demand for capacity has pulled back by about 1.5%. While the end of Q3 saw requests for 16,000 loads per day, current requests for loads are below 15,700 per day. But this dip in the demand doesn’t necessarily signal a slow or even normal peak season. Shippers are still requesting 2% more loads per day than they were this time last year. This time last year 26% of those electronically tender loads were being rejected. Compare that to now when rejections are between 21-22% and you can see that shippers and carriers alike are getting more loads on the road despite higher demand year over year.
Despite loosening capacity, the spot market is on an upward climb. Ordinarily when there is more capacity on the market, spot rates go down. But in this current market all the emphasis is on getting goods in quickly, which means that companies are totally bypassing their contract rates and going for spot rates because they know they’ll be able to pay a little more for faster service. That’s why spot rates continue to climb, clocking in most recently at $3.53 per mile inclusive of fuel. Now that we’ve officially reached peak season we fully expect that this plateau is going to continue to climb.
Another factor leading to increased shipping costs is record fuel prices. The US Department of Energy reported that fuel prices have reached their highest average since 2014. Higher fuel prices impact every part of the supply chain and at a certain point, those costs will be passed on to shippers as part of the cost of doing business. The question we’d like to pose is, “Does it have to be?”