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US truckload spot rates drop in November
Shippers paid less on the US dry-van spot market in November than September or October. This shows that the holiday season has failed to boost truck demand the way it usually does. Spot rates normally increase between September and December.
Through November 29th, MoM rates fell in 39 states and rose in five, according to the JOC Shipper Truckload Spot Rate Index. Shipper-paid spot rates also dropped out of all major US port cities in November.
The normal escalation of rates between September and December likely isn’t going to happen this year. The excess capacity will be absorbed by typical peak-season disruption. For example, rates out of LA fell $0.08 per mile last month and have declined in nine out of the last 10 months. In Savannah, an average shipper is paying $0.09 less per mile on spot business.
Spot market demand has remained low because contract carriers are accepting most loads. Some shippers are wary of using the spot market because they wish to maintain strong relationships with their trucking partners.
The NRF reported that a record 196.7 million Americans shopped in stores and online between Thanksgiving Day and Cyber Monday. However, many shippers are skeptical about whether Americans will have the disposable income to spend on a new home or renovation, which would bolster truck demand.
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Trans-Pac service contracts renegotiated lower
A large number of shippers on the eastbound trans-Pac have renegotiated rates in existing service contracts. These negotiations reflect a market that has softened significantly over the past three months.
The contract rate reductions are a sign that some shippers largely prefer service continuity with existing carriers over a more chaotic approach of fishing for spot rates. Importers are locking in rates that are far below the $6,000 to $8,000 per FEU that they negotiated last spring. Some carriers who refused to increase allotments are coming back to shippers with significantly discounted rates.
According to Xeneta, the “ultra-large majority” of shippers already negotiated lower contract rates or are in the process of doing so. One carrier said most shippers are keen to avoid an all-out rate war that would end up fraying relationships with their core carriers.
Carriers and their customers are now looking ahead to the 2023-24 contracts that will take effect on May 1st. However, they caution that the discussions are preliminary and will not get serious until the new year.
Both shippers and carriers say it is too early to project what the 2023-24 contract rates will be. However, they agree that rates will likely be about 50% of what they were when the 2022-23 contracts were signed last spring.
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About O’Neill Logistics
O’Neill Logistics is a leading third party logistics provider. We operate in California, Savannah, New Jersey. We service many verticals including Garments, Fashion Accessories, Footwear, Furniture, Home Goods, & Electronics. Additionally, we offer omni-channel distribution and all value-added services. Lastly, we focus on retail “drop shipment” fulfillment and item-level fulfillment services with same-day service offerings.
O’Neill Logistics has over 2 million square feet of state-of-the-art facilities. Additionally, we offer dray services to support the warehouses and provide distribution to retailers and wholesalers. Our reliable 3PL platform combines sophisticated technology with robust, flexible processing designs and speed-to-market gateway models.
Lastly, we aim to simplify your supply chain. We deliver exceptional service and can optimize your operational performance. Therefore, we aim to build, protect and foster strong business partnerships.
Please reach out to us if you have any questions or need assistance with your logistics solutions!