COVID-19 and other impacts are shaping the transportation industry in unexpected ways. From seasonality and rates to the economy and even the weather, the shipping business is anything but business as usual right now. As we move to the fourth quarter of 2020 and beyond, conditions may continue to fluctuate. To understand rates in the meantime and where they may go in the future, Capstone has identified four trends to watch:

1. Typical seasonality effects won’t apply

Unlike most years when freight volumes tend to decrease after the July 4 holiday, volumes have remained elevated into August, which has driven tighter capacity and higher spot market rates. The Outbound Tender Volume Index reached a record high of 13,739 in the first week of August (as shown below in blue), representing a 33% increase over 2019 volumes and 34% increase over 2018 levels. Spot market rates are also at 2020 highs nationally, leading many carriers to reject contracted freight in favor of loads with better margins.


This level of demand is greatly unusual given that unemployment remains high. However, the pandemic lockdown restrictions that shuttered businesses in March are less severe now and many businesses are up and running again. In addition, now that people aren’t spending as much money on services, such as bars, movie theaters, and vacations, demand has shifted to goods instead.

2. Carriers will be selective as rates remain high

The DHL Supply Chain Pricing Power Index, which analyzes the market and estimates the negotiating power for rates between shippers and carriers, showed the following the first week of August.


In this market, carriers have options and will shift their business to Shippers of Choice—those that pay well or provide other value through efficient unloading and loading, nice facilities, quick payments, and a positive working experience.

This freight market will continue to put pressure on contract rates for shippers, who are already searching deep into their routing guides to find freight capacity. Because market rates often lead contract rates by six to nine months, now is a good time for shippers to discuss 2021 plans and expectations with their contracted carrier network.

3. Shippers will plan carefully to avoid 2021 disruptions

Planning for RFP season is underway, and this year we’re seeing shippers approach bid events with caution. Many will push their RFPs out to 2021 to avoid commitments while there is still uncertainty ahead.

To mitigate high freight costs, shippers may also send RFPs out to a larger list of carriers than in previous years, working to drive down price through greater competition. They can also award contracts more strategically by targeting transportation partners with strong track records for service, performance, and communication, with a goal of driving down total transportation spend through efficiencies. Additionally, shippers may scrutinize their alignment with carrier competencies, looking for route optimization through loops that maximize truck efficiency or encouraging carriers to compete only for lanes where they can execute with a high level of service.

Given ongoing capacity constraints, shipper routing guides will likely shift to models that assign multiple primary carriers per lane with up to 15 in their waterfall, rather than a single primary. Since primary carriers must commit to 95-100% of load acceptance, this added safety measure helps ensure coverage when shippers need it.

4. Economy and weather may add volatility

The U.S. economy had a better July than expected, adding 1.8 million jobs and reducing the unemployment rate to 10.2%. However, concerns over future lockdowns fuel doubts about whether the trend can be sustained since the gains came largely from the hospitality and leisure sectors, where the future is still foggy at best. In addition, the stimulus benefits that helped sustain the economy during the first four months of the pandemic expired on July 31 and Congress has yet to agree on a new package. The outcome of these negotiations will further shape freight volumes as 16 million people potentially face significant decreases in income.

Weather is also on carrier and driver radars because an extremely volatile hurricane season lays ahead. Meteorologists adjusted predictions to 24 named storms this season—up from 20—as well as the chance that hurricanes will reach landfall. Hurricane season extends from June to November, affecting shipping routes and driving conditions along the U.S. Gulf and Atlantic coasts.

Your Partners in Logistics

As we enter Q4, pressure on capacity and rates will likely persist—unless more unforeseen changes come along. If the COVID-19 pandemic has taught us anything, it’s that a flexible and resilient supply chain requires strong relationships and regular communication with your transportation partners. No matter which way market conditions shift, Capstone is here to help you navigate the volatility ahead. Contact us to learn more.