September 2022 Freight Market Update

09/19/2022 by Greg Massey

September 2022 Freight Market Update

Stay up to date on the latest information on conditions impacting the freight market, curated by Trinity Logistics through our Freightwaves Sonar subscription.

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SPOT OR CONTRACT?

Do I stick to my routing guide? Or do I want to take my freight to the spot market?

Up until the early part of this year, most shippers probably answered these questions with an answer like, “whoever can get me a truck first.” Freight volumes were elevated, and capacity was king.

Now that things have normalized (although that term has taken a new meaning), shippers have options. As you can see in Figure 1.1, the spot market rates are roughly $0.85 per mile less than contract rates. This presents an interesting choice for shippers. They can stick with their normal carriers or brokers, and while they may pay a higher rate, they also have a known commodity.

Or does the shipper decide to save a few dollars on their freight shipping costs with the understanding they would be working with a carrier or broker with whom they have no or little history? Decisions, decisions, decisions. One thing to point out is the spread that continued to grow wider since February has stabilized, if not slightly shrunk in the past few weeks. This could be due to a variety of reasons, but something we will continue to monitor to see if the trend continues.

Figure 1.1 is a graph that shows the difference between contract and spot rates.
Figure 1.1 * Note: The blue line shows the difference between contract and spot rates.
Figure 2.1 is a graph showing a blue and green line with the blue line representing the spot rate per mile and the green line showing the contract rate per mile.
Figure 2.1 *Note: The blue line shows the spot rate per mile while the green line shows the contract rate per mile. Typically, there is a two-week delay in contract rate-per-mile reporting.

EAST OR WEST? 

Container ships continue to make their way to U.S. ports. However, where those ships drop anchor has shifted.

In Figure 3.1 you can see the west coast logjam of ships has been waning, with the number sitting at anchor being less than 10 around the LA/LB ports (this time last year that number was near 50). Conversely, the number has increased in other ports.

Savannah has over 40 ships waiting for a berth, Houston has 24 ships at anchor, and NY/NJ has 19. It is expected that shippers that chose to route their freight to ports other than the west coast because of congestion and labor contract concerns will begin to divert their freight to the west coast. Not only is the transit time shorter, but currently, the container rates are less than those delivering to the east coast. And as this happens, we will see a short-term imbalance in over-the-road capacity until carriers can reposition their fleets. This imbalance will help, or hurt, depending on your origin points, the spot market freight rates.

Figure 3.1 is a graph comparing the amount of container ships waiting off of the Los Angeles and Long Beach ports in California in 2021 versus 2022.
Figure 3.1 *Note: The blue line shows the ships waiting on LA/LB ports in 2021 versus the red line showing them in 2022. 

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