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Strong Market, Strong Upward Pressure on Rates and Capacity Continues

Sept 22, 2020

 

Happy first day of Autumn!

A snapshot of this week's freight market shows widespread high freight volumes throughout the country and the continuation of high rates on the spot market. 

The national outbound tender volume index (OTVI) has leveled off some, but like outbound tender rejection rates, it is also high compared to last year... 50 percent higher than the last two years to be exact. There are no signs of volumes dropping significantly (which would need to happen before we see rejection rates and tight capacity pricing normalize). 

The national outbound tender rejection index (OTRI) seems to have hit a high note on September 9, 2020 at 26.68% and has been sliding back downward over the course of last week. But even so, rejection rates are still significantly higher year over year. One in every four loads is being rejected, according to Freightwaves. 

A look at ocean shipments gives us a glimpse into the sustainability of the strong market over the next few weeks. The charts below show the notable increase in volume coming into the ports year over year. The blue line on the bottom chart is this year and the orange dotted line is last year (LY).

Weekly market updates help you identify areas where freight capacity is tight as well as areas that are loose and easier to cover. This helps you better understand the market and provides a basis for your pricing.

 

Ports Y over Y

Ocean freight

Spot Market Rates & Volume  

According to DAT, "Spot market truckload rates are in their longest continuous rally in five years." The graphic below shows a weekly view of the month-to-date national average spot rates from DAT from Septembr 14 through September 20, 2020.

 

Overall Spot load posts are up 14.1%  w/w , but still up 9.8% m/m

Dry van: Load-to-truck ratio is down 1.9% w/w, up 20.8% m/m and 135.4% from 2019.

Dry Van Spot Rates: Rates are up 2.5% w/w, up 8.9% m/m, and up 22.1% y/y

Reefer: Load-to-Truck ratio is down 9.1% w/w, up 26.4% m/m, and up 108.3% y/y.

Reefer Spot Rates: Rates are up by 1.0% w/w, up 6.1% m/m, and up 13.8% y/y.

Fuel prices have declined slightly at 0.5%

spot ratessep22

Who's Got the Power?

Yes, the needle is stuck, at least for the time being. The DHL Power Pricing Index remains at 85 points. That means carriers are still in a very strong position for negotiations and rates are expected to remain higher than normal, although there are some pockets of the country where capacity is fluctuating. 

 

Freightwaves reported on Friday that some carriers are "holding capacity until the end of the day before auctioning it to the highest bidder."

 

The pricing power index is a weekly gauge of who has more sway in negotiations when it comes to pricing and freight rates. The farther the needle leans to the left of the gauge, the more power the shipper has in negotiation. The farther to the right, the carrier has the upper hand. 

pricing power 9-22

Contract Market - Outbound Tender Volume & Rejection Rates  

 

The graphs below show activity for outbound tender volumes and outbound tender rejections since the beginning of the year in the United States. The OTVI graph on top has a blue line showing 2020 volumes and an orange line showing 2019 activity.  The OTRI graph shows that almost a quarter of all contract shipments are being rejected. The data is compiled from the heaviest shippers in the contract market.

 

Markets with largest increases in rejections:  

  • Erie, PA   18.57%
  • Pittsburgh, PA   8.72
  • Pendleton, OR   8.50%
  • Eau Claire, WI    6.48%

Markets with strongest volume increases:

  • Erie, PA  110.49%
  • Ontario, CA 19.38%
  • Charleston, SC  57.08%
  • Syracuse, NY  30.37%
    (Graphs below courtesy of Sonar/Freightwaves)

otvi 9 22

otri 9 22

Capacity This Week

Dark red and pink areas (hot spots!) on the map show where capacity is tightening. Rates in these areas will be higher than in blue areas of the map where capacity is loose. 

Note: Top Map is reefer capacity, bottom map is dry van.

(Maps courtesy of DAT Market Conditions)

Reefer 9 22

Dry 9 22