Spot-market freight rates were above contract rates for just 13% of van lanes on a national average during this year’s third quarter—marking a significant drop from the quarter before when 24% of lanes saw higher spot-market rates. These results are per the just-released “Spot Market Rates vs. Contract Rates Q3 2011” report authored by Mark Montague, TransCore Freight Solution’s industry pricing analyst.
The report compares spot rates with contract rates for dry vans in 7,600 lanes. According to TransCore, the rates were based on more than $850 million a month in actual transactions, derived from rate agreements and freight bills in TransCore’s Truckload Rate Index database.
In lanes where spot-market rates rose above contract rates, the average difference was 17 cents per mile (7.7%) in July; 29 cents per mile (13%) in August; and 31 cents per mile (16%) in September.
But the spread was wider in lanes where contract rates exceeded spot market rates. The average difference was 40 cents per mile (19%) in July; 38 cents per mile (18%) in August; and 31 cents per mile (14%) in September.
Montague explains in the report that in the third quarter, the spot focus shifted to the Midwest where 12% of spot rates exceeded contract rates. “In Q3, the number of lanes with higher spot-market rates declined to 1,014 (13%) of the 7,600 major lanes sampled.
“Areas of higher demand shifted throughout Q3 away from the Southeast and toward the Midwest,” he relates. “Lanes originating in New England had the highest percentage increase, but outbound rates remained lower there than in other regions. West Coast markets also gained strength in September.”
He details in the report exactly how seasonality affected rates in the third quarter:
- June. Spot-market rates bested contract rates in 24% of lanes nationwide, with heavy concentration in the Southeast.
- July. Rates receded most in the Southeast and gained in the Southwest and Midwest - but just 13% of major lanes had spot-market rates over contract rates.
- Aug. Rates continued to dip in the Southeast as spot-market rates rose in lanes originating in the Midwest. Outbound rates also went up in New England - but remained lower there than in other regions.
- Sept. Spot-market rates rose $0.03 (1.0%) nationwide - and exceeded contract rates in 15% of lanes, up from 12% in August.
“Spot market rates - the ‘broker buy’ rates that freight brokers and 3PLs pay to the carrier - are typically 10 to 15% lower than the rates that shippers pay to carriers with large fleets, as part of an ongoing contract,” Montagu points out in the report. “Spot market rates vary regionally as well as seasonally, so carriers in high-demand markets often command top rates at certain times of the year.”
Montague’s report also lists in order the top-ten van markets where spot rates exceeded contract rates in Q3: Green Bay, WI; Evansville, IN; Bloomington, IL; Rockford, IL; Bowling Green, KY; Milwaukee, WI; Addison, IL; Nashville, TN; Joplin, MO; and Cape Girardeau, MO.