Anticipation surrounding ELD enforcement drives up spot rates
- After more than a month of official ELD implementation, Truckstop.com states there is sufficient evidence of market effect as a result, according to a document emailed to Supply Chain Dive.
- In the last two weeks of 2017 and throughout January 2018, the market jumped to about 25 basis points above the five-year average. For most of 2017, the market stayed about 10 basis points higher than the five-year average.
- "Since that period corresponds exactly to the ELD mandate, one can conclude that people posting on Truckstop.com care about ELDs," the document stated. "Nothing else has changed during that time to cause such a response."
January typically sees a drop in spot market rates compared to December, and this trend held true for the past month. But the 30% YoY increase remained, indicating the market is still feeling the jolt from the ELD mandate.
Noel Perry, chief economist for Truckstop.com, predicts rates will decrease in February but still remain well above averages.
"The middle of February is the normal seasonal low point in rates," he told Supply Chain Dive. "We know the rates have been declining, but they are still holding about 30% above a year ago."
We're likely to see another bump in April, when ELD enforcement goes into place. But come July, the rates will start to calm down.
"Human beings are extremely short-term focused," Perry said. "There will be an overreaction to the [truck capacity] shortages ... I fully expect that by fall peak this year, spot rates will be down slightly year to year."
This is a classic supply and demand case — the market fears truck drivers are in short supply, thus price goes up to keep demand at equilibrium.
"When you get a change like we have today with the ELD, plus relatively rapid freight growth, the number of new drivers you have to hire to keep up is bigger than you can actually do, given the difficulty of hiring a driver," Noel said. "You just can't expand your recruiting enough."