Transfix Take: Midweek Market Update (March 9)
Transfix Take Podcast | Ep. 41 – Week of Mar. 9
Contracts Make a Comeback
Because truckload markets continue to shift in favor of shippers, contract freight is becoming more favorable than spot, leading to improved tender acceptance by carriers.
While tender volume is increasing, tender rejections have been declining slowly during the past four weeks, allowing shippers to take a breath. Rejections have declined to their lowest level since before the pandemic. The Outbound Tender Rejection Index (OTRI) currently hovers at around 18.5% of tendered loads being rejected — a relatively high rate compared to levels before the pandemic, but it helps support the switch to contract. Not only are carriers accepting more of their commitments, but contract rates have also surpassed what shippers will pay on the spot market. DAT load-to-truck ratios (LTRs) are dropping and point to overall market easing.
West Coast rates have been lower in most markets. However, in Denver last week, temperatures hit record lows, capacity issues shot up, and rejections surpassed 20%. Shippers there should fare better this week, however. Rates continue to drop out of the West Coast, but freight coming in from other regions is driving carriers’ pricing power.
While the South and Southeast are experiencing volume increases that likely will continue in the coming weeks, shippers should know that capacity has not been a significant issue. Still, in markets along the border in the South, as well as markets with major ports in the Southeast, such as Jacksonville, demand is outpacing the supply of trucks, so capacity will likely continue to tighten. Shippers likely will see volumes increase due to the onset of produce season, as well as increasing demand on East Coast ports (more on port issues below).
Winter weather has presented Midwestern shippers with a winding road when it comes to capacity, but it’s likely that capacity will loosen and rates will decline in the coming weeks — unless freight is heading back to the West Coast. This week, carriers have a good chance of finding pockets where they have the upper hand, but we expect to see overall softening in this region.
In the Northeast, carriers hold pricing power, but the Harrisburg market is starting to ease. The largest market in the Northeast, Elizabeth, New Jersey, shows no signs of slowing; volume continues to climb quickly, bringing more capacity constraints for shippers who last week saw a 15% increase week-over-week in tender volume. Imports remain at high levels, as does the number of vessels waiting off the New York/New Jersey coast. Shippers will likely not see volumes ease here in the immediate term, so carriers still have the advantage.
Ports: A Tale of Two Coasts
Although continual improvements have been made at the West Coast ports, congestion at East Coast ports is worsening. Keeping a close eye on import volumes there and in the South will be key for a successful produce season, as neighboring port and produce markets may battle for capacity.
Additionally, labor unions at West Coast ports are beginning contract negotiations. The current contract ends June 30, and we have seen in the past that disruptions caused by delayed agreements can be costly and could increase congestion.
Pete Tirschwell weighs in for JOC.com: “Concern was palpable this week at the TPM22 Conference about potential port disruption in the coming months tied to negotiations over a new West Coast port labor contract, with sources telling JOC.com it’s possible the talks — and by extension, uncertainty for supply chains — will stretch months beyond the July 1 expiration of the current deal.
“The lack of reassuring signals from the International Longshore and Warehouse Union (ILWU) and its management counterpart, the Pacific Maritime Association, against a backdrop of still-heavy port congestion, as well as highly contentious issues, such as terminal handling automation, is leading importers to shift cargo away from the West Coast.”
Trucking Support for Ukraine
The trucking industry is coming together to support Ukraine. Eastern Europe is closely connected to the U.S. trucking industry; many drivers come from this region, and many dispatchers live there. Carriers and drivers are raising money for the growing humanitarian crisis.
According to FreightWaves, a group of 16 logistics companies, dubbed Trucking & Logistics Professionals for Ukraine (TLPU), contributed more than $300,000 in humanitarian aid in fewer than three days. Most major container lines are no longer going into or out of Russian ports, which will continue to affect Russia, where citizens will struggle to get the goods they need. We are watching in real time what effect the situation will have on U.S. supply chains.
Manufacturing Up in February, Marking 21 Months of Growth
U.S. manufacturing increased in February, according to the Institute for Supply Management’s (ISM) Manufacturing ISM Report on Business. The ISM Purchasing Managers’ Index (PMI) for February registered 58.6%, up 1 percentage point from the January reading. The PMI, a monthly survey of supply chain managers across 19 industries, is a measure of the direction of economic trends in manufacturing. An index higher than 50% indicates growth, so the February reading marked a 21st consecutive month of expansion. New orders, the key indicator for the sector, increased 3.8 percentage points to 61.7%.
“Manufacturing performed well for the 21st straight month, with demand registering month-over-month growth and consumption softening slightly, though less than forecast,” said Timothy Fiore, chair of ISM’s Manufacturing Business Survey Committee. “The impact of omicron declined in February as swiftly as it appeared in December, leaving March and April’s manufacturing environment favorable, especially with new orders and backlogs registering strong growth.”
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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