Bottoming Out: Freight Rate Rebound Poses Risk for Shippers
Freight rates have favored shippers for over a year. That’s about to change.
Data analytics point to a market inversion: Rising spot rates are about to exceed contract rates for the first time since early 2022. The history of such inversions tells us that contract rates will follow the upward path of spot rates after a few months’ lag. How can shippers take steps to protect their profits in this new environment?
Here are the indicators that are sparking concern:
- Margins are steadily narrowing between current spot rates and their higher year-earlier equivalents. Rising spot rates have historically resulted in higher contract rates.
- Contract rates have been steadily declining, to the point where they are about to intersect with rising spot rates — a condition that has historically preceded an economic cycle characterized by more expensive shipping as both spot and contract rates start to rise together.
- Capacity is declining as carriers exit the market in response to a decline in consumer shopping fueled by fears of inflation and recession, pricier diesel, more costly insurance, and higher price tags on used trucks.
- Data shows that truckers’ costs are now equivalent to their revenues, a condition that will cause still more carriers to exit the market.
While these forces will create a tighter shipping environment, shippers need not sit back and allow higher freight costs to erode the bottom line.
- How can bolstering carrier relationships help control costs?
- How can data analytics help shippers forecast the market inversion timing, identify at-risk shipping lanes, and compare rate increases against larger cost pictures?
- How can frontline workers prepare for the coming market inversion?
- What do shippers need to know about the steps carriers and brokers are likely to take as the market inverts?
Get these questions answered and learn about steps shippers can take to protect their profits as the market inversion materializes.
