Even with a stronger-than-anticipated December peak season, we expect January to give shippers a good bit of relief as seasonal volumes relax during what is traditionally the slowest month of the year for freight. Capacity will be abundant throughout the month, but it would be unwise to expect these conditions to last into the warmer months of 2020. There are signs that the overall direction of the market is turning. Traditionally, the two peaks of the year in the spot market tell you the direction of broader market conditions. The fall peak in 2017 was over 20% higher than the summer peak, while the fall peak in 2018 was over 16% lower as the market fell into oversupply. This year’s fall peak was a modest 2% higher than the summer value, suggesting we have probably seen the bottom of this cycle with rates increasing throughout the year.
Several supply-side factors support a tighter 2020 market, including but not limited to the final phase of implementing the electronic logging device (ELD) mandate that started in December 2018, the drug and alcohol clearinghouse reporting (starts Jan. 6) and skyrocketing insurance costs due to an increasing number of nuclear verdicts against carriers. Most of these will take time to manifest in the broader market but the second half of 2020 carries significant risk to shipping rates if demand holds.