Chart of the Week: National Truckload Index, National Truckload Index Linehaul Only, Diesel Truck Stop Fuel Price – USA SONAR: NTI.USA, NTIL.USA, DTS.USA
The typical retail price of diesel (DTS), the first fuel for Class 8 trucks, has increased 16% because the end of July — the most important and fastest increase since October of last yr. The rapid jump in fuel costs is masking the actual fact the trucking market continues to be deteriorating.
Rising diesel prices have propped up truckload spot rates in September, masking their decline toward the top of the quarter. Taking a look at the common spot rate for dry van loads represented by the National Truckload Index (NTI), rates increased around Labor Day and wish to finish the month ahead of where they began.
Removing the overall estimated cost of fuel from that number (NTIL), spot rates are literally trending lower, which is unusual for the top of the third quarter. This might speed up the quantity of capability exiting the market, shrinking the timeline firms must enjoy a historically loose transportation environment.
Demand has been on the rise over the past several months. The entire variety of tenders, shipper requests for truckload capability, are up ~15% over April. The rise in demand has had a negligible impact on carrier availability as national rejection rates (OTRI) remain in a deflationary zone below 4%.
Capability has tightened barely over this era, but to not the purpose where there was significant upward pressure on rates. Typically sustained OTRI values above 6% are required to have a long-term impact on rates.
The takeaway is that there continues to be not enough freight to support the available capability and sharply rising fuel prices will only make the environment more difficult for carriers, especially ones who depend on spot market volumes.
It’s difficult to pass fuel costs along quickly on the spot market since carriers are bidding against each other on the open market. Many shippers expect last week’s rate to be the baseline. In a loose capability environment, it is incredibly difficult to lift rates, even when your costs are rising.
Contract freight can also be exposed to sharply rising fuel costs as retail prices are inclined to move much slower than the wholesale or rack prices that many larger fleet fuel purchases are based on. The spread (FUELS) between retail (DTS) and rack (ULSDR) has shrunk significantly since June.
The underside line is that carrier costs have risen quickly in a market that doesn’t allow for price increases. This can exacerbate the prevailing trend of carrier exits, which was already expected to leap this winter because it seasonally does.
For shippers, it is just yet another reason to arrange for a tighter market in 2024. Even when demand doesn’t hold, the speed of capability’s exodus will eventually catch up.
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