Transfix Take: Weekly Market Update (Dec. 14)
End of Year Raising More Questions Than Answers
The final few weeks of 2020 are showing a seasonal decline in volume following Thanksgiving, though tender rejections and rates are bucking the trend with rejections slowly rising and rates pushing north through the end of this past week. The Outbound Tender Volume Index (OTVI) has shown a decrease of 11% since Thanksgiving, sitting at 15,266 — still an incredibly high level.
“We expect the coming week to bring a similar trend to Thanksgiving week, when rejections hit yet another all-time high, as drivers start to head toward their regional hubs and come off the road for the holidays,” Justin Maze, Transfix’s senior manager of carrier account management, says. Capacity and rates potentially could beat out the Thanksgiving records set just 2 weeks ago.
“As we begin to look past 2020, we do not see much relief coming for the markets in the short term,” Maze says. “Demand is hot, and inventories remain parched. January will, most likely, see month-over-month growth in imports, as shippers continue to restock and prepare for the Chinese New Year.”
Seth Holm of Freightwaves concurs: “There is a strong pipeline of West Coast imports that should lead to large freight flows in those markets well into Q1 of next year, though retail loads will be less time-sensitive post-Christmas.”
“We are digging into data and talking with our shipper and carrier partners to shape an opinion on markets for January and beyond,” Maze says. “For the past 8 months, forecasting market conditions has been filled with uncertainty. That, at least, will be constant in January. COVID-19 is still the main variable, with the vaccine upping the ante. FedEx and UPS are the primary transporters of the vaccine’s initial distribution; we just don’t know what impact a large-scale vaccine distribution will have on the market. The beginning stages of the distribution of the first 20 million may not have as much an effect as when we start shipping more than 100 million vaccines and related supplies to more than 600 sites around the U.S., which is planned for February.”
Spot Rates Hit YTD Highs, Come Down
National average dry van truckload spot rates hit a YTD high during the first week of December at $3.07/mile, and spot volumes recovered after the Thanksgiving holiday, but if you look closely at the trucking market, John Paul Hampstead of FreightWaves suggests “warning signs are flashing yellow.”
“Spot rates out of Los Angeles, Dallas and Atlanta are down across the board, and some major markets have seen tender rejections fall,” Hamstead writes. “Slower retail sales and inventory turns may be suppressing some trucking volatility this month, as many retailers skipped the traditional heavy discounts in order to widen margins on their already-low inventories.”
Truckload volumes, though, are up since Thanksgiving, with large increases in the number of available loads week over week, according to Overdrive.com. “While spot rates have been setting records, there are signs that pricing is beginning to soften for the first time in more than seven months.” In a breakdown from the week after Thanksgiving, reefer volume overall dipped YoY, largely because of the depressed food services sector. Dry van load postings reached a five-year high, and demand for flatbeds declined slightly.
While the rest of 2020 still has time to post more rejections and higher spot rates, January will bring decreases in time sensitivity and urgency, despite the strong import volumes into the West Coast. The question of how long this incredibly long peak season will last remains.
Transfix Revolutionizes Drop-and-Hook
Trying to get their loads delivered in a freight market lacking capacity, shippers are increasingly routing freight through drop-and-hook networks that use pools of spare trailers to enable quick turnaround times for drivers, Ben Ames writes for DCVelocity.
Transfix believes there are enough trailers; they just aren’t being used efficiently. “So the company is applying its artificial intelligence (AI) and machine learning (ML) freight-matching technology to trailer pools, creating an ‘aggregated national network of mid-sized carriers to provide high-quality asset capacity that leverages underutilized assets,’” Ames writes.
Transfix surpassed 400% annual growth for the Transfix Drop freight business, as shippers capitalize on this reliable solution for sourcing flexible capacity in an unpredictable market. Transfix’s approach focuses on mid-size carriers that have drop equipment and are looking to create more sustainable businesses.
The nation’s top retail, e-commerce and CPG brands, including Target, Unilever, Staples, BJs and Wayfair, already rely on Transfix’s extensive drop expertise. Shippers have a turnkey solution through Transfix that enables them to build custom, scalable drop programs with the added advantages of real-time visibility and actionable data insights. Carriers, in turn, can better utilize existing capacity to increase consistency and scale their businesses through Transfix’s network of leading shippers.
“Drop is a core component of nearly every major shipper’s supply chain. But despite its importance, brokers have historically struggled to create smart, scalable solutions that work for both shippers and carriers,” said Lily Shen, CEO of Transfix. “The right technology and team have allowed us to rapidly scale our live business with enterprise clients. Now, we’ve rewritten the drop playbook to fill a real market gap, providing shippers with the reliability of asset carriers and the flexibility and intelligence of tech-enabled logistics solutions.”
Read more about Transfix Drop.
With the uncertainty and volatility surrounding the U.S. economic recovery, shippers need a partner that can help them adapt and excel — no matter the circumstance. Shippers turn to Transfix for our leading technology and reliable carrier network. As volumes drive higher, we are here to help: Learn more about our Core Carrier program and Dynamic Lane Rates. As part of our ongoing market coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.