![]() ![]() Though given the increasingly apparent impact of Winter Storm Uri, it may take until Q4 to arrive now as opposed to Q3 as implied in our current projection. And so long as spot rates continue to fade sequentially lower into month end, which we expect, despite the potential kink we see coming next quarter based on an artificially low Q2 2020 Y/Y comp, our 2021 cycle forecast will remain unchanged with Y/Y deflation still expected in the back half of the year. And as jarring as the last month has been, with our Q1 2021 DAT TL Spot Index surging all of the way to +39.5% (again, from +31.5% last month), it still remains technically below our projected Q4 2020 cycle inflection point of +40.2% – albeit only by a hair. So now the question for most of the market becomes to what extent will rates correct lower at all given the grab bag of inflationary narratives currently in play – be it port congestion, semiconductor shortages, fresh stimulus checks, potential infrastructure spending, and the reopening of the US economy in general on the back of continued progress in federal and state vaccination programs.īut in a market that was already in the process of overshooting demand in the form of Net Class 8 tractor orders and the rate at which new common carrier operating authorities were being granted, this recent Uri-driven leg higher in spot rates has likely only accelerated the supply response as estimated industry operating incomes per mile reach even higher highs. And while weather conditions have certainly improved since Uri’s exit and supply chains with geographic storm exposure have begun to recover, TL Spot rates have proven much slower to correct. The 2014 event, as long as it lasted, was responsible for only $5 billion in damage. And while Uri technically lasted only 11 days, forming February 13th and dissipating on the 24th, compared to the 2014 Polar Vortex that lasted all of 4 entire months it was far more catastrophic. And that “mini polar vortex” can now be referred to more formally as Winter Storm Uri, a major Category 3 storm that has become the costliest winter storm on record – responsible for an estimated $195 billion in damage and at least 70 deaths. We acknowledged the possibility that spot rates could rise sequentially high enough from there through the back half of the quarter to overtake Q4 and defer our inflationary inflection point by at least another quarter, though considered it a pretty unlikely scenario given rates would have had to spike +$0.42/mile or +20% M/M in March to do so.Īs it stands a mere one month later however, March DAT TL Spot Index rates are now sitting +$0.32/mile higher and +15% M/M – so perhaps the order wasn’t as tall as we figured. ![]() What at that point was characterized as a mini polar vortex centered over Texas appeared to be dissipating as weather forecasts finally began to improve indicating an eventual thawing and normalizing of otherwise severely disrupted transportation networks. And given that trajectory, the probability of Q4 holding up as our inflationary inflection point signaling the US TL cycle top and inevitable path towards the next collapse in rates looked increasingly likely. ![]() ![]() the January read of +38.3% – and sat well below the current cycle’s Q4 2020 high water mark of +40.2% Y/Y. ************* Excerpt from The Pickett Line March 2021 Issue *************Įxactly one month ago today and at the midpoint of the quarter, our Q1 DAT TL Spot Index had faded lower to +31.5% Y/Y vs. ![]()
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