Truckload freight volumes fell 12.8% while rising fuel surcharges kept spot rates elevated in February, according to DAT Freight & Analytics.
The prices to move dry van and refrigerated freight on the spot market fell for the first time in nine months as a national average. The spot van rate averaged $3.10 per mile last month, a 1-cent decrease over January, while the reefer rate was $3.53 per mile, down 6 cents month-over-month, according to DAT. The flatbed rate rose a penny to $2.87 per mile.
The average contract rate for van freight rose 10 cents to $3.09 per mile; it increased for the 21st consecutive month and hit $3 per mile for the first time, according to DAT. The average contract reefer rate was $3.25 a mile, up 9 cents, while the flatbed rate gained 8 cents to $3.43 a mile. Higher contract rates contributed to lower volumes on the spot market.
“Spot market rates and volumes naturally decline in February as more truckload freight moves under contract,” Ken Adamo, DAT’s chief of analytics, said in a release from the organization. “Volatile diesel fuel prices have given the market a jolt, and shippers and carriers are reviewing their playbooks for ways to reduce empty miles and improve fuel efficiency.”
Diesel was elevated—the nationwide average ended February at $4.032, the highest price ever for a gallon since the U.S. Energy Information Administration began recording the average in 1994—before the Russian invasion of Ukraine officially started in March. Once the invasion started, the U.S. average rose to a record $5.25 per gallon. Oil prices abated a bit but have again risen beyond $115 per barrel this week, so the U.S. diesel average might be headed to never-before-seen territory.
Surcharges spike as diesel prices surge
The national average fuel surcharge for spot van freight was 46 cents per mile in February, its highest point since September 2014 and 19 cents more than the average in February 2021, according to DAT.
An “all-in” broker-to-carrier spot rate has two components: a line-haul rate and a surcharge amount that varies with the price of diesel. The average price of diesel jumped almost 75 cents to $4.85 a gallon from Feb. 27 through March 6, and the average fuel surcharge for spot van freight spiked from 45 cents to almost 60 cents per mile during that time.
For brokers, a spike in fuel prices can have a deflationary effect on base or line-haul rates
“Brokers may feel compelled to suppress the line-haul rate so they can pay the fuel surcharge to the carrier and still be competitive with pricing to the shipper,” Adamo explained. “Few brokers can afford this kind of pressure for a long period of time.”
Small carriers are especially susceptible to fuel-price fluctuations because they raise costs and affect cash flow. Small carriers are less likely to negotiate bulk-fuel discounts. The carrier may not get paid until 30 days or more after its invoice is delivered. By then, the cost to refill the tank may have gone up substantially.
Fuel-saving strategies for carriers include shorter trips, not accepting dead-head miles, slowing down to improve fuel economy, and even parking the truck for a while if they can’t negotiate rates that produce a comfortable margin. “Any one of these responses can affect available capacity, the distance a truck can cover in a day, and ultimately the efficiency of supply chains,” Adamo said.
Volume sees seasonal decline
DAT’s Truckload Volume Index (TVI) was 227 last month, 3% lower than January, according to DAT Despite a sharp decline in load-posting activity month-over-month, the number of loads posted to the DAT One load board network increased 24.1% compared to February 2021.
The national average spot-market van load-to-truck ratio was 7.3, down from 9.3 in January, meaning there were 7.3 available loads for every available van on the DAT network. The reefer load-to-truck ratio was 13.7, down from 20.4 in January, and the flatbed ratio edged down from 86.7 to 83.9.