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Election Day 2020 

As Unpredictable as This Year's 

Freight Market - Nov 3, 2020

 

It is election day, and supply chain professionals are casting their votes for the candidate they think will have the most positive impact on issues affecting our industry such as trade, infrastructure, taxes, deregulation, employment and the economy. Just like the freight market this year, the election outcome is hard to predict.

 

On the pandemic front, several pharmaceutical companies are claiming a COVID-19 vaccine is not too far off, but the challenge will be distributing five billion vaccines worldwide when it does become available. The medicine will have to be transported by refrigerated truck, and that could trigger a whole new level of capacity disruption.   Watch the video Distributing the COVID Vaccine: The Greatest Logistics Challenge Eve.

 

But for now, the current truck shortage has kept rates high and lead times longer than usual. The fact remains there is not enough capacity to handle the explosive consumer demand. Retailers are keeping larger quantities of inventory on hand so that the e-commerce wheel can keep turning, using fulfillment centers to deliver to customers more rapidly. The  influx of inventory is keeping the ports busy too, as you can see in the graph below.

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.

Maritime imports

Maritime Imports

The graph above shows the similarities between U.S. customs maritime import shipments and truckload outbound tender volumes over the last six months. The blue line indicates imports, and the orange shows the outbound tender volumes that are mirroring one another closely. This may be an indication that volumes will remain heavy past the holiday peak season and well into 2021.

Who's Got the Power?

After some shifts in capacity in some major markets over the last two weeks, we are seeing the power pricing index hold steady at 75, which is down from 80 three weeks ago. This still puts carriers in a very favorable position for negotiations, most likely until year end. 

The pricing power index is a weekly gauge put out by DHL that indicates 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. 

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Market Volatility- Where rates & capacity are changing the most

The graph below shows a sample snapshot of mid-sized freight markets by market share and their volatility. There have been some major shifts in the market this week.

Strong Decreases in Outbound Rejections for 11 Markets: Stockholm, CA - Milwaukee, WI - Fresno, CA - New Orleans, LA - Winchester, VA - San Francisco, CA - Pittsburg, PA - Rockford, IL - Madison, WI - Alexandria, VA - Missoula, MT

Hartford, CT - Oklahoma City, OK - Shreveport, LA - Ft. Wayne, IN

Strong Increases in Outbound Rejections in 7 Markets: Twin Falls, ID - Oklahoma City, OK - Pendleton, OR - Shreveport, LA - Texarkana, TX - Amarillo, TX - Rapic City, SD

Volatile markets

Spot Market Rates & Volume 

With more freight than ever moving from the contract market to the spot market, national average van rates that hit an all-time high in September were surpassed by even higher rates in October. (Below stats from October 26-Nov 1.)  Now only a few days into November we are seeing lowering prices for van and flatbed, but a significant jump in reefer rates.

Overall Spot load posts are up 7.9% w/w, but down -5.9% m/m

Dry van: Load-to-truck ratio is up 15.6% w/w, down -20.5% m/m and up 156.3% from 2019.

Dry Van Spot Rates: Rates are up 2.5% w/w, up 1.5% m/m, and up 33.5% y/y

Reefer: Load-to-Truck ratio is up 22.3% w/w, down -10.2% m/m, and up 155.3% y/y.

Reefer Spot Rates: Rates are up by 2.5% w/w, up 0.7% m/m, and up 22.5% y/y.

Fuel prices have decreased slightly at -0.1% w//w.

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National Outbound Volumes

The graph below shows van and reefer volumes for the last 30 days. Van volumes still far outweigh those of reefer freight. They also appear to stay flat while reefer volumes fell sharply the last few days of October.

The outbound tender rejection rates shown below for the last month are still extremely high for reefer frieght at 42.27%, down from 44.05% last week, whereas van rejections are still hovering just below 25%. 

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Capacity This Week

Dark red and pink areas (hot spots!) on the maps below show where capacity is tightening. The top map displays reefer capacity and the bottom map, van. As you can see by the large amount of blue and light blue on the van map, capacity has remained loose in some of the major markets throughout the U.S. As a result, rates in the darker red areas will be higher than in blue areas. 

 

Tight reefer markets include Idaho, Oregon, Washington state and Southern California on the West Coast. In the middle of the country, reefer constraints are seen in Texas, Arkansas, Kansas, Nebraska and South Dakota. The Mid-West and East Coast have their fair share of tight reefer markets as well. The bottom map clearly shows that dry van capacity is less severe but is tight in areas of Southern California, parts of Texas and Louisianna, the Ohio Valley and New Jersey. 

(Maps courtesy of DAT Market Conditions)

reefer capacity

van capacity

Have a Question? Ask one of our Experts

Do you have specific questions about the freight market in your area? Don't hesitate to ask us. Your sales representative or a member of our professional logistics team is ready to help, so give us a call! 800.568.2240.