DAT: Van Spot Holds at $3.12 a Mile as Load Posts Drop 18%; Linehaul Up 35%

The Analysis

The road from the container yards outside Los Angeles to a distribution centre on the south side of Dallas runs about 1,430 miles if you take Interstate 10 east and then cut north on I-20, and a driver who behaves himself can do it in two long days. This line I have driven, and I have also watched it price itself, which is a different kind of driving. The week of 4 to 10 October is one of those weeks you have to read twice. DAT counted 2.7 million load posts on its boards, down 18 per cent from the week before, because everything anybody wanted to count as September revenue had already been moved before the quarter closed on the thirtieth. Truck posts went the other way, up 4 per cent to 177,300. And the average broker-to-carrier spot rate on a dry van did not fall. It rose three cents, to 3 dollars and 12 cents a mile.

Put the rest of the week alongside it. Reefer came in at 3 dollars 68, up three cents. Flatbed sat at 3 dollars 68 as well, down two cents, and it came down because diesel came down, with the national average easing to about 6 dollars 18 a gallon. Strip out the fuel and the accessorials and look only at linehaul, and the year-on-year numbers are 35 per cent for vans, 33 per cent for reefers and 29 per cent for flatbeds. So the trade press will tell you that freight dried up and rates held firm, and both halves of that sentence are true, and almost nobody has explained how. I want to spend this piece on the how, because the how is where your money is.

Say it plainly, it is a road problem. The road itself is fine. What changed is where the trucks spent the weekend and what happens to a driver once he reaches your dock. If you are an importer clearing boxes on the West Coast and feeding an inland network, the next six weeks decide whether your trucking plan was built on the rate or built on the road, and those two plans behave very differently once the holiday freight shows up. I will work the arithmetic on one real lane, then say what I would move, by when, and at what number.

Start with the calendar, because that is the cheapest explanation and you should spend it before you spend a harder one. The third quarter closed on 30 September. Every retailer, every manufacturer and every third-party logistics operation in the country has a reason to get shipments moved, delivered and invoiced before that date, they do it every year, and the week after is always thin. The 2.7 million load posts DAT counted for 4 to 10 October is not a demand signal. Run it backwards and the week before was about 3.29 million. That is roughly 590,000 loads of quarter-end push that did not need to happen a second time. Compare the first clean week of October with the last week of September and you are comparing the morning after with the party, and you will frighten yourself for nothing.

The number that should frighten you is the other one. Loads fell 18 per cent and truck posts rose 4 per cent, which means the previous week was roughly 3.29 million loads against roughly 170,500 trucks, and this week was 2.7 million against 177,300. Work it out and the load-to-truck ratio went from about 19.3 loads for every posted truck to about 15.2. That is the market loosening by roughly a fifth inside seven days. On every yardstick the trade press uses, capacity got materially easier in the same week the price went up three cents.

So the national average has stopped being the thing that sets your rate, and I want to say why, because the reason is worth money. A truck post is a truck sitting in a place. One hundred and seventy-seven thousand three hundred of them is one hundred and seventy-seven thousand three hundred places, and the places where quarter-end freight came to rest are not the places where October freight begins. Freight does not sit still between quarters. The surge that emptied out on the thirtieth ran outbound from distribution centres and plants, and the tractors that carried it finished the week somewhere else entirely, in markets that are thin in October. Your lane is not the nation. If you ship out of a West Coast port complex, the number that matters is the load-to-truck ratio in that metro on the morning your freight is ready, and it is published weekly and it is not the number in the press release.

The other reason is the one nobody writes about, and it is the one I would build a plan around. A carrier does not earn by the mile. He earns by the day, and by how many turns he can get out of a tractor and a driver inside it. Put a driver in your dock for four hours past his free time and that truck is off the board for most of a working day, and whatever he quotes the next shipper has to cover those hours. That is why a market with fewer loads and more trucks can still price upward. The loads went away and the clock got worse. Say it plainly: linehaul is not where the money is this quarter, the clock is.

Now split the three equipment types, because they are telling you three different things. Reefer at 3 dollars 68, up three cents in a week when volumes fell, is a season story and a fleet story. There is not much refrigerated equipment in this country and there is a great deal of produce moving in October, and grocery distribution centres are the worst offenders in the country on dwell, with appointment windows, lumpers and a receiver who takes the pallets when he feels like it. If you ship temperature controlled, you are the one funding everybody's detention.

Flatbed at 3 dollars 68, down two cents, is the cleanest read in the whole release: it came down on fuel and on nothing else, and its linehaul is still up 29 per cent on the year. Flatbed is the most spot-exposed and most fuel-exposed corner of the market, so it is the one that shows you the pass-through most honestly. Van is the workhorse and the one most importers actually buy, and it moved the wrong way against a market that loosened a fifth.

Who actually pays for this is worth splitting out, because the answer is not evenly distributed. A shipper with an annual contract and a carrier who knows his dock will feel almost none of it: his rate moves with the contract, his detention is written into the agreement, and he reads the DAT release the way other people read the weather. A shipper buying spot on a lane he runs eight times a month feels all of it, because every one of those eight loads is priced on the morning it moves and every one of them carries the receiver's dwell. Between the two sits the broker, and the broker is the reason the 35 per cent linehaul number and the 3 dollars 12 all-in number disagree.

The gap is his margin plus the accessorials he has already priced in, which is why the all-in number looks calm while the linehaul underneath it has moved a third in twelve months. If you want to know what you are really paying for the road, ask for linehaul and the fuel table separately on every quote, and ask what happens to detention. A broker who will not split them is selling you a black box on a lane where the money has moved into the hours.

Let me take the 35 per cent apart, because that number is being quoted everywhere without anybody saying what it is made of. Assume your fuel surcharge table is built the way most of them are, on a baseline of a dollar fifty a gallon and six miles to the gallon. At six dollars eighteen the fuel component works out at about 78 cents a mile. Take that off the 3 dollars 12 and you are left with roughly 2 dollars 34 of linehaul. If linehaul is up 35 per cent year on year, then a year ago it was about a dollar seventy-three. Which means this: of every extra dollar you have paid for trucking this year, essentially all of it is the price of the tractor and the driver, and almost none of it is the price of fuel.

The fuel piece, 78 cents a mile on the book below, is a pass-through. It falls when diesel falls and comes straight back when diesel rises, and it is not a negotiating win and it never was. If somebody in your office sent an email this week celebrating a two-cent drop because diesel eased, that email was about 78 cents a mile of exposure leaning your way for as long as the diesel stays down.

Here is the thing I did not see in any of the coverage, and it is the whole reason I am writing this. The market loosened by a fifth on the ratio and the rate went up anyway, which means the rate is no longer being set by the balance of freight against trucks at all. It is being set by what happens at the two ends of the run, in your yard and at your receiver's dock, and those hours are billed back to you on the invoice rather than quoted to you on the rate sheet. Nobody negotiates the invoice. Shippers spend October arguing about three cents a mile in a conference room and then pay for four hours of driver time at the dock without ever asking who owns it. That is the gap, and on a mid-sized book it is worth more than every basis point you will win on the linehaul this quarter.

Let me put numbers on it, on one lane, with every assumption written down. Assume you run 40 loads a week, cleared at the West Coast port complex and trucked to a Dallas distribution centre, 1,430 miles. Assume van spot at 3 dollars 12 all in, of which 78 cents is the fuel table and 2 dollars 34 is linehaul. Your weekly linehaul plus fuel is 40 times 1,430 times 3.12, which is 178,464 dollars. Assume your DC allows two free hours and averages four hours of dwell, and assume detention is billed at 75 dollars an hour past free time. That is 40 loads times 2 chargeable hours times 75, or 6,000 dollars a week, about 312,000 dollars a year.

Assume one load in five needs the tractor brought in from 120 miles away and the carrier prices that repositioning at linehaul, 2 dollars 34 a mile. That is 8 loads times 120 miles times 2.34, about 2,246 dollars a week, roughly 117,000 dollars a year. Now the thing everybody celebrates: if diesel falls another 20 cents a gallon, your fuel table drops about 3.3 cents a mile, which on the same book is roughly 1,900 dollars a week. The detention line is more than three times the fuel win, and it is the line nobody has ever put on a rate sheet.

So what do you change. There are three ways off this road and each of them has a price and a precondition, and the precondition is the part people skip. Switching mode means intermodal: Los Angeles to Dallas by rail with a dray at each end. Assume door-to-door of five days against two and a half by truck, assume the rail move saves you 22 per cent of the all-in truck number, and assume drayage at both ends adds 450 dollars a load. The saving is 22 per cent of 178,464, about 39,262 dollars a week, less 40 loads times 450, which is 18,000, leaving about 21,262.

The cost is two and a half extra days in transit: assume 90,000 dollars of cargo a load and carrying cost at 20 per cent a year, which is 49 dollars 32 a load-day, so 40 loads times 2.5 days times 49.32 comes to 4,932 dollars a week. Net is roughly 16,300 dollars a week, around 850,000 dollars a year. The precondition is that your dock has to be able to take rail boxes, because rail demurrage and per diem bite far harder than truck detention, and on a dock already running four hours you will hand back everything you just saved.

Switching the port is the bolder move and it only suits part of the book. Discharge at Houston instead of the West Coast and your inland leg is 240 miles instead of 1,430. Assume the all-water run from Asia to the US Gulf takes about 13 days longer than to the West Coast. The saving is 1,190 miles at 3 dollars 12, or 3,713 dollars a load, which on 40 loads is about 148,500 dollars a week. The cost is the pipeline: filling 13 extra days of in-transit inventory is 40 loads times 13 days, 520 load-days, at 49 dollars 32, roughly 25,600 dollars once, after which the steady-state carrying cost is unchanged and what you have really given up is 13 days of responsiveness.

There is a precondition you have to check before you believe that 148,500: all-water Asia to the Gulf usually prices above the base port and Houston drayage is a tighter market than the West Coast. Assume the ocean leg is 900 dollars a box more expensive and 40 boxes a week costs you 36,000, and the move still clears 110,000 a week. I would only put the non-urgent 60 per cent of the book on it and keep 40 per cent on the West Coast for speed, and I would remember that October is still inside hurricane season on the Gulf.

The remaining lever is inventory. Build two extra weeks of safety stock at the Dallas DC now, in the October trough, before the holiday headhaul market tightens. Two weeks is 80 loads, and the one-time carrying cost is 80 times 49 dollars 32 times 14 days, about 55,000 dollars. What you buy with it is the right not to go shopping for capacity in November at whatever the board says that morning.

Timing matters as much as the arithmetic. Spot moves the same week you see it. Your annual contract does not: it gets priced off fourth-quarter linehaul, and the number in that bid is 2 dollars 34 against a dollar seventy-three. If you open your 2027 bid in November, you are bidding into the week when loads have fallen 18 per cent, which is exactly when procurement feels strongest and is most likely to lock a number the carrier cannot hold into February. The counter-intuitive read is the one I would act on: the week the market looks loosest is the worst week of the year to sign a twelve-month deal, because you are negotiating linehaul while the man opposite you is looking at his insurance, his tractor payments, his driver wages and his idle hours.

Two conditions would flip everything I have just written, and I would rather name them than be caught by them. If diesel keeps easing and load posts fall another 15 per cent or more, van breaks 3 dollars and this whole floor story dies before December. The thing to watch is not the rate, it is the weekly load post count: four consecutive weeks below 2.5 million and the rate follows inside two or three weeks. The other condition is a holiday restock landing on top of a weather event, a Gulf storm or an early Rocky Mountain snow, and in that case the 177,300 trucks get sucked into headhaul markets, West Coast outbound goes into a vacuum and 3 dollars 12 becomes 3 dollars 45 inside ten days.

At that point no amount of negotiating saves you; only capacity booked in advance does. And the most fragile number in the whole release is the 4 per cent rise in truck posts. It has been positive for one week. It is the number that says capacity is still coming into the market, and if it turns negative every judgement above gets worse at once.

The traps, in the order I expect people to step in them: signing the annual contract in the trough; chasing two cents of fuel pass-through; going to intermodal before the dock is fixed and losing it all to demurrage; assuming the 177,300 posted trucks are in your market; and leaving November capacity until the last week of October to book.

One more horizon, because this lane does not end at Christmas. The annual bid you sign in December sets your cost through next September, and the linehaul in it is 2 dollars 34 against a dollar seventy-three. Whatever you do about the dock, do not sign that bid without a fuel table that resets weekly and a detention clause that caps the hourly rate and defines free time in writing. Those two clauses are worth more than a cent a mile on every load you move next year.

Back to whether this road still runs. It runs. The 1,430 miles are the same 1,430 miles and the two truck stops on the way are still where they were. What changed is that the road is no longer priced by the mile this year, it is priced by the hour. Your job is not to talk 3 dollars 12 down to 3 dollars 05. It is to turn four hours at the dock into two and a half, to turn waiting-for-a-truck into a truck waiting, and to buy November capacity in October. Leave the rest to the weather.

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— By Ömer Kaya