Trucking rates and supply chain capacities are subject to fluctuation. Any of us who have been around the industry for more than a season understand that. But why are spot rates and chain capacities especially volatile right now? The short answer is the same now as it has been forever: supply versus demand. The longer answer, though, is more complicated.
We’re seeing some spot rates and chain capacities return to (or continue to exceed) their pre-pandemic levels, but it could just be a seasonal surge. Demand is difficult to predict because the spending habits of consumers and consumer-facing businesses has been so significantly disrupted by the pandemic that long-term forecasting is all but impossible. Spending habits will, of course, eventually return to normal or settle into new, predictable patterns. But until then we may see continued volatility.
The Recent Surge
As an increasing number of states lift operating restrictions on businesses, the demand on slowed supply chains has increased. At the same time, demand on pandemic-bolstered supply chains has remained relatively high. The result is that overall average spot rates are returning to recognizable territory, and some, like refrigerated spot rates, are climbing. It’s important to remember, though, that the Fourth of July typically brings us a surge. What we’re seeing may be that seasonal spike, or it may be the beginning of a sharp, sustained upturn.
Right now, forecasting beyond the holiday with any degree of certainty is difficult. When we take the traditional surge with continued uncertainty of the spread of coronavirus, predictions about spending habits and future demand are almost meaningless. On the other hand, it shouldn’t be long after the holiday that more useful forecasts emerge.
Moving Forward
If the economic recovery continues to move forward—even with minor setbacks—we’ll likely see rates stabilize and capacity tighten. Once the rejection rates for contract carriers break the all-important 7%-mark, spot rates will rise until contract rates catch up. This is typical cyclic behavior for trucking. But getting back to those dependable trends will require consumer demand for tangible goods to return to something close to pre-pandemic levels. Until demand settles back into predictable patterns, volatility could continue.
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