As a part of our on-going COVID-19 coverage, we’ll be providing breaking news, resources, and insight into the pandemic’s impact on the industry.
Volumes Continue To Rally, California Leading The Way
When volumes bottomed out in early April, it appeared that the market had nowhere to go but up. Unfortunately, April volumes remained stagnant and were largely unchanged despite produce season kicking off in earnest in Florida, Texas, and California. With the majority of the country still on lockdown and consumer confidence hovering at a three-year low, it appeared that historically low rates and excess capacity would persist throughout the Spring. But three factors have drastically impacted domestic freight volumes in the last two weeks:
– The vast majority of states have relaxed or lifted stay-at-home orders, which is unleashing pent-up demand.
– Carmakers and auto manufacturers reopened on May 18th, which has caused inbound volumes in both Michigan and Ohio to rise rapidly in the past week.
– While produce season has been largely a non-factor on the national level, it has impacted outbound markets in Southern California and Arizona in the past week.
For perspective, total volumes out of California have rebounded by 30% in the past four weeks, marking a return to pre-COVID-19 levels. This drastic volume spike has tightened capacity, particularly in the greater LA area. Los Angeles has been impacted by a jump in freight volume more than any major metropolitan area in the US in the past month but is still a part of a major market shift being experienced coast-to-coast.
National freight volumes jumped 5% WoW for the second consecutive week and now sits 7% higher year-over-year. This positive momentum for carriers will soon impact rates and capacity in a meaningful way in June. Andrew Cox, a Research Analyst at FreightWaves, framed the shifting dynamic in this way, “While rates are coming off a depressed base, spot rates have increased in the vast majority of lanes. Consumer spending data and a bump from produce season put the carriers in a better position than they have been in throughout the past month.” As a digital freight broker, we remain well-positioned to provide the timely capacity shippers will need when freight volumes impact the availability of trucks in the second half of 2020. Our carrier network was specifically developed to provide flexibility in tight circumstances and to regions impacted by swings in freight volume.
The Impact of Fewer Carriers
The JOC’s Truckload Capacity Index released a report last week indicating that large US carriers are “making deeper cuts in their fleets after an unprecedented 10-quarter expansion in available capacity.” The CARES Act and subsequent federal stimulus measures have bought some carriers more time to ride out current market conditions, but it’s clear that this is not the case across the board for all carriers. The news out of the JOC comes on the heels of April job loss numbers that were historically significant. Nearly 90,000 drivers were let go in April alone, the largest single-month loss of trucking jobs in US history. The majority of those cuts came from large carriers, a few of which filed for bankruptcy. Our carrier development team has noted pockets of tightening capacity in the Northeast and South Florida in the past two weeks, an emerging trend that could usher more volatility into the supply chains of shippers nationwide.
Tender Rejections More Pronounced By Region/Equipment
According to FreightWaves, outbound tender rejections increased for the third consecutive week. The media outlet’s Outbound Tender Reject Index (OTRI) illustrates the gradual increase over the course of May.
Interestingly, rejection rates have varied wildly by trailer type. In conjunction with produce season, reefer rejection rates are four times higher than flatbed rejection rates. Seth Holm, a Senior Research Analyst at Freightwaves, had this to say of the most recent OTVI data:
There are pockets of tightening capacity, mostly on the West Coast and in New England. Now that volumes have begun to return, OTRI is likely to rise modestly in the coming weeks as carriers regain confidence that they may have options besides their contracted freight.
The Transfix team will be closely monitoring import data, manufacturing in the Upper Midwest, and produce season’s impact on reefer capacity in the coming weeks. Depressed import volumes will help shape June freight volumes and rates. We will keep an eye on regional ports over the coming weeks as they have the potential to materially impact capacity in June.
As a company, we remain committed to providing critical services to our customers during this crucial time. For more on COVID-19’s impact on the freight market, please refer to our website, blog, social channels, and via email.