Chart of the week: Van Contract Rates, National Truck Freight Index (hauling costs less fuel above $1.20/gal) – US SONAR: VCRPM1.USA, NTIL12.USA
Long-term (contracted) rates for dry truck freight (VCRPM1) have remained essentially stable over the past year, increasing about 1% since July 2024. Short-term spot rates (NTIL12), which are naturally more volatile, have increased about 4% over the same period. With all the talk about capacity leaving the market at an alarming rate, what does this stability in contract rates mean for 2026?
In the short term, the answer is probably nothing. The contracts are unlikely to rise any time soon as there is currently no significant pressure on them. Tender rejection rates remain within acceptable ranges for most carriers, and while spot rates are less reliable, they continue to offer deep discounts for those willing to take advantage of them.
Seasonal pressure will increase in the coming months as the holiday shipping season accelerates, but it is difficult to see this translating into strong or sustained increases in contract rates. Demand remains extremely weak, with little evidence of improvement beyond speculation. However, there is an important caveat.
Last week’s graphic article illustrated that capacity appears to be leaving the market faster than demand is declining, something with little to no historical precedent over an extended period. The main reason is that this freight recession has lasted longer than any other in the modern era.
In the chart above, both rate lines fall sharply for most of 2022. The faster-moving spot rate hit a bottom in May 2023, while contract rates found a softer bottom in 2024.
Although spot rates have been rising since 2023, they remain largely unprofitable. Contract rates have been more resilient, suggesting they are currently near the lowest sustainable levels for most traders.
The American Transportation Research Institute’s (ATRI) latest report on carrier costs supports this, showing that average operating costs increased 33% between 2019 and 2024. The contract rate index (VCRPM1) is about 16% higher than its 2019 level, meaning operating cost has increased twice as fast as the rates the market has been willing to pay.
In addition, recent regulatory actions targeting non-domiciled and undocumented drivers have intensified. US Department of Transportation Secretary Sean Duffy recently stated that he plans to crack down on “CDL factories” and the fleets that use them.
This increased regulatory pressure, which began in the spring, has only recently begun to impact the rate environment. Spot rates rose unusually in early October amid reports that immigrant drivers were avoiding the roads due to increased ICE surveillance.