In a time when we are searching for answers as the COVID-19 pandemic takes hold, DAT Solutions is pumping out articles and data in an attempt to make sense of the crisis. The below post was originally posted on DAT’s COVID-19 page, and reprinted here with permission.
Demand crests, signaling change in spot rate trends. A cresting pattern is taking shape in supply/demand data, and spot rates are beginning to stall or decline for both dry van and reefer. While DAT and other industry analysts have predicted this result, it is unclear whether the trend will turn into a sharp downward correction, a holding pattern, or a return to the upward trajectory of recent weeks.
Emerging trends will support longer-term forecasts. The next 7 to 10 days should provide a good indication of that future direction, but uncertainty will continue to be a factor in longer-term forecasts. Once the inventory replenishment surge has abated, there are many possible outcomes for rates and volumes. The recovery could be a V, a U, a straight vertical line, a plateau, or some combination.
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Falling ratios signal impending rate decline
Load-to-truck ratios drop sharply for vans and reefers. A sharp correction in load-to-truck ratios brought dry van demand back to February levels, below 3 loads per truck. Compared to 2019, however, comparisons remain strongly positive. If ratios continue to decline over the coming weeks, that would be consistent with seasonal norms, while staying ahead of 2019 trends.
Load posts drop while truck posts increase
Splitting the two components of the ratio, we can see that both demand and supply were in play. The underlying causes are slower demand for replenishment of retail inventories, and additional capacity being drawn into the market in pursuit of high rates. Unfortunately, this combination of factors adds to downward pressure on rates, going forward.
Spot van rates stall, at least for now
Spot dry van rates appear to have stalled at current levels, at least for now. The total increase since the start of March is about 13%, excluding fuel and accessorials. DAT’s real-time rate data signals that the rolling average rate is cresting and will likely contract during the next 3 to 7 days.
Rate contraction emerges as short-term trend
Van rates are contracting in the short term, but longer-term trends have stalled. By comparing the 7-day weighted moving average to the 3-day weighted moving average, subtle shifts emerge in both momentum and direction. This style of analysis is deployed in the stock market, as well.
Rates are unlikely to match record highs of 2018
Upward trend may not last much longer. Dry van spot rates are unlikely to continue recent upward trends, at least in the next 1 to 2 months. DAT’s core model predicts that seasonal trends will take over in April and exert downward pressure on rates. However, optimistic and pessimistic models display a range of expectations based on current market conditions, with the predicted trend leaning more toward the pessimistic scenario.
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