Brokerage revenues drop at asset-based carriers as market deteriorates

(CHART: DATA FROM TRUCKLOAD CARRIERS ASSOCIATION AND DAT INSIDE FREIGHTWAVES’ SONAR)

(CHART: DATA FROM TRUCKLOAD CARRIERS ASSOCIATION AND DAT INSIDE FREIGHTWAVES’ SONAR)

Brokerage revenues dropped at asset-based carriers as the market deteriorated between June 2018 and August 2018, according to Truckload Carriers Association data and DAT spot rate data housed inside FreightWaves’ SONAR.

TCA’s brokerage revenue data is collected from a sample of asset-based carriers that participate in TCA Best Practice Groups. The data represents brokerage revenue as a percentage of total revenue at the operations.

Brokerage revenue spiked as high as 13.67% in June when the spot market was blowing up, but as rates started to fall, revenues followed suit. By August, brokerage revenues sank to just 10.82%.

Brokerage revenues have come in as high as 14.76% when the market was beginning to shift in March 2017, however, asset-based revenue was also lower at that time.

The DAT spot rate average was at its highest in June 2018, coming in at $1.97 per mile, not including fuel. August’s average dropped a full $0.28 per mile to $1.69.

(CHART: FREIGHTWAVES’ SONAR)

(CHART: FREIGHTWAVES’ SONAR)

At the same time that brokerage revenues and spot rates were dropping, FreightWaves’ SONAR’s Outbound Tender Volume Index (OTVI) showed a drop of 7% to 8% between June and August. This indicates loosening capacity and a weakening market.

“Generally speaking, the middle part of the year was one of the strongest periods of growth in the last few years. Gross Domestic Product grew at a 4.2% pace in Q2, which was the best growth since 2014,” FreightWaves Chief Economist Ibrahiim Bayaan said. “The things that drive freight demand--retail spending, industrial production, trade--were booming during that time. Since then, activity has been good but not as strong as the middle of the year.”

While this year saw a strong June and a July softening in line with traditional seasonality, the normally anticipated August recovery did not pull through in 2018. Instead, the market continued to soften.

“Asset-based carriers tend to have brokerage/logistics operations as hobbies versus a way of life, therefore they’re not as exposed to spot market volatility to the extent a standard 3PL would be,” FreightWaves Senior Market Analyst Zach Strickland said.

Brokerage revenue slowdown at the asset-based carriers suggests greater slow down at the 3PLs. According to recent data, this trend of market softening has continued into the fourth quarter, indicating fourth quarter earnings calls could be a little more uncomfortable for leadership at brokerage-heavy operations.