The spread between dry van truckload spot rates and contract rates has shrunk at its fastest pace since the start of COVID, signaling the trucking market’s growing fragility. Spot rates usually trade below contract rates due to the brokerage-driven spot market structure and transactional nature of spot rates. When the market tightens, spot rates rise above contract rates, leading to rising tender rejection rates.

In 2022, the spread between contract rates and spot rates widened to nearly 40% before slowly contracting. By Christmas 2023, the aggregate spot rate index was just 1% below the contract rate index, the lowest reading since March 2022. Spot rates are now rising relative to contract rates and becoming more responsive, potentially destabilizing contract rates in the coming year.

The trucking market is likened to people standing on a melting iceberg, waiting for the next ice age. The latest surge in spot rates indicates how thin the ice has become. The FreightWaves Chart of the Week highlights the collapse of the spot-to-contract rate gap to a near four-year low, reflecting the volatile nature of the trucking industry.

Read more at Yahoo Finance: Spot-contract gap collapses to near four-year low