Dry van freight rates have fallen to their lowest in nearly three years. In reports by Trucking Dive, shippers stand to gain. They now, more than ever, have significant bargaining power. It has been the case through the end of 2023. The contract rates have dropped to the lowest. The drop also includes the fuel surcharge.
It has been a while since the dry van average last fell below $2.50. It was back in the early days of 2021. The numbers have been declining for a while now. It has been a slippery slope since hitting peak numbers in June 2022. They have been on the decline ever since then. They hit the lowest last month.
The rate stood at $2.49.
Shippers are in quite a strong position as the New Year kicks on. They hold the upper hand when it comes to negotiating contract rates.
Carriers on the spot market can only hope that things get better. They are not sure how all will be, but they are hopeful that with time, the market will hopefully turn in their favor.
Spot and contract prices keep getting narrow with time. Despite this, they are not worlds apart, but the spread between them is still there.
There have been some significant amounts of capacity out there on the market. Numbers are beyond the freight available, so shippers have been able to negotiate lower contract rates. In addition, the spot rates have been lowered, meaning that the shippers have higher grounds when negotiating the contract rates.
The General View of the Market
All is not just yet entirely doom and gloom. There have been some exceptions despite the decline in dry van contract rates. Over the past months, spot rates have been relatively steady. That stability reduces the press with whereon the larger contract market. In December, the spread between dry van spot and contract rates dropped from 7 cents to 39 cents. The numbers are in line with what was back in 2019.
The demand for freight has not hit the levels that would light things up yet. The numbers are still below the trend. The significant positive thing is that they have slowly but steadily begun to recover. The pandemic was a considerable blow to all sectors of the world. The transportation sector could have done better, too.
The effects of the pandemic were hefty, but the good news is that they are slowly fading away. People are gradually regaining their financial abilities. They now have more disposable income. Retail sales are also slowly but steadily speeding up.
Over the years, there have been many challenges that have affected the market in different ways. The normal recessions were always easy to overcome since most were seasonal, and people knew how to maneuver. The COVID-19 pandemic hit slightly differently; most have not fully recovered from its effects.
Both the spot and contract rates are slowly bouncing back after hitting some low numbers recently. For now, all there is hope is that things will stabilize after hitting, and the supply chain will return to normal.