Transfix Take: Midweek Market Update (Feb. 23)
Transfix Take Podcast | Ep. 39 (Week of Feb 23)
Atypical February Trends
Capacity is loosening and tender rejections are declining, all while rates and volume are holding firm at high rates. Typically, all these metrics trend together: Loosening capacity is created by less demand, which drives improved tender acceptance and eases pressure on rates. But this is 2022, so nothing is typical.
National capacity has been trending in shippers’ favor for nearly a month. Contract rates are making a comeback, climbing to record highs in January and, ultimately, leading to improved carrier acceptance. The national average rate is higher than at any time in 2021 — with an assist from sky-high fuel prices — so while shippers are not feeling relief on their balance sheets, they are beginning to see rising spot rates begin to plateau. Tender rejections sit at their lowest level since pre-pandemic, dipping below 19% nationally.
Dry van volumes are at an elevated level — 17% higher year over year, and shippers have been seeing reefer rates move even faster in their favor following weeks of capacity issues. This is driven largely by improved weather conditions that allow shippers to move specific types of freight without worrying about damage by freezing temperatures. However, this may be just a short breather for shippers — produce season is coming, and with it, significant refrigerated volume needs. This likely will drive up rates, beginning in southern regions, and it will also affect the dry van sector.
Currently, shippers in the West are enjoying abundant capacity and lower rates. Import congestion on the West Coast may be finally starting to subside.
The Port of Long Beach set a volume record in January. Port Executive Director Mario Cordero attributed this to terminal capacity “finally opening up. … We expect to remain moderately busy into the spring, as we make significant progress to clear the docks and process the backlog of vessels waiting offshore.” (Note: We are also keeping an eye on ports in Asia, as congestion is increasing there, which could see downstream effects in the U.S.)
Even the Midwest is starting to see relief for shippers, with volume, tender rejections, and rates all falling. The Northeast remains a carrier-favored market. This could be partly due to some West Coast import freight being diverted to the East Coast. Rates in the Northeast are on the rise, as demand slowly outpaces supply.
In the Southeast, rates and capacity continue driving toward carriers’ favor: Rates have not eased since recent winter storms, and imports are keeping coastal markets tight. Capacity issues in the South and Southeast could spell trouble for shippers as we near produce season.
Q1 Demand at All-Time High
Even with inflation at 40-year highs, freight demand continues to hit all-time highs in Q1. Retail sales in January surged past predictions to rise 3.8%. Many shippers are pulling freight forward to build a larger inventory than they had pre-pandemic. Shippers likely will see some relief in the short term, relative to how we started the year, but in January, load-to-truck ratios rose to 9.3, and spot truckload rates hit a new high, nearly $1 per mile higher than a year ago. Higher rates are driven by factors that will not change quickly, such as rising driver pay, equipment costs, insurance, and fuel. There are no signs of lowering fuel prices on the horizon, as we are currently at the lowest oil inventories in more than five years, with demand still rising.
The movement of freight is changing in every mode, as shippers do their best to keep up with record demand while fighting congestion at multiple points throughout the supply chain. Shippers who think forward, use data and think outside the proverbial box on solutions, while partnering with companies such as Transfix, will come out of this ongoing freight rally in a better position and well ahead of competitors. The one huge win through this pandemic has been speeding up the digital transformation of the transportation industry.
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.
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