The spot market premium for loads originating in the Southern Texas cone

When the price of a truck on the Spot market is more expensive than the contract market, a premium or penalty is paid by shippers for unplanned shipments. It’s not unusual to see the spot market trade at a discount to the contract market as demand for trucks falls; in fact, it is a key indicator that demand for trucks is tanking. The McAllen and Laredo markets make up most shipments, by volume, in the southern cone of Texas. 3PLs who do business in Zone 7, specifically on the border, are accustomed to seeing demand for, and the supply of, trucks become volatile. This is the time of year when 3PLs should be present to the fact that owner operators are going to demand a higher rate, because they know in the months of November, December, and January, there are generally more loads than trucks. It’s predictable.

The spot contract rate spread is something to keep your eye on, as near shoring picks up momentum in the coming quarters. Manufacturers who can choose China or Mexico for their sub-components are choosing Mexico more frequently. We see the early signs of supply chain restructuring away from Chinese suppliers. The number of imported TEUs handled at the Ports of LA and Long Beach is crashing, in favor of other ports of call located on the Gulf and East Coasts. Kansas City Southern – Mexico, a class 1 Railroad, reported a 31.9% increase in the number of car loads this year verses last. That means more shipments moving by rail north to the US assembly plants. Additionally, US manufacturing added 22K jobs in September, specifically associated to makers of motor vehicles & parts, fabricated metal products, and electrical equipment and appliances. While the media focuses on a preseason that’s over, remember that manufacturing of durable goods is being repatriated to the US and Mexico. That is a sign of good things to come for North American trucking companies. This is one of several reasons why it is hard to believe that trucking is headed into a recessionary period, or that it would remain in recession for very long.

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