Volatility Continues, West Coast Ports Jammed With Freight

When it comes to volatile freight markets, 2021 isn’t looking a whole lot different so far from 2020. After the holiday drag, volumes have started to increase again at levels 40% higher than the previous two years, and rejections stay steady at more than 22% (see more on this below), which could be the floor, as volume returns. Proving the point, the Outbound Tender Volume Index (OTVI) now sits at 14,344 and is back on an upward trend.

Despite this shift, “we are seeing that overall capacity is still relatively loose, especially in the major markets on the West Coast and Northeast,” Justin Maze, Transfix’s senior manager of carrier account management, says. “Long-haul volume came nearly completely offline during the previous 3 weeks, but we have seen a return during the past week. It’s important to keep in mind that long hauls keep drivers attached to the same load for a longer period of time, up to 5 days, vs. a driver doing 5 separate loads during the same time frame, which has some effect on capacity in different large markets. These loose markets could be short-lived, but many factors will come into play.”

One of those factors, U.S. imports, skyrocketed YoY for the first few weeks of 2021, and on top of that, they’ve hit a huge traffic jam on the West Coast. The Long Beach and Los Angeles ports are showing no sign of improvement when it comes to congestion, with more than 35 ships anchored and waiting for spots at the ports to open, and 46 more at berth.

Volume at the Port of LA is expected to be up more than 80% YoY between Jan. 17 and Jan. 23, and up nearly 148% YoY between Jan. 24 and Jan. 30, according to the Port of LA’s forecast. A pandemic-fueled labor shortage at the port is only exacerbating the situation.

“Whether shippers will attempt to move this freight as soon as they can or hold it in nearby warehouses — which are already filling up fast — remains to be seen,” Maze says. “Transfix will be watching this closely, looking at load-to-truck ratios and seeing if they flip. We are also monitoring what will happen if, as capacity potentially leaves the loosening market, freight pours into the market from the port congestion all at once.”

 

Rejections still at elevated level

The Outbound Tender Reject Index (OTRI) has fallen from its all-time high near 28% on Christmas Day to a rate of 22.38%.

Seth Holm writes for Freightwaves: “While the decline is significant, it shouldn’t be taken as a sign that the market has gained a material amount of capacity. Rather, the ongoing rebidding of contract freight for 2021 is likely pushing contract rates higher, more in line with spot rates, resulting in improved routing guide compliance. The fact that contract tenders jumped 25% WoW confirms a lack of drop-off in physical load volumes.

“The freight market is still incredibly tight, and capacity is not easy to source relative to historical standards. Now that a tight market is being rewarded with higher contract rates from shippers, there may be gradual downward pressure on both tender rejections and spot rates in the coming weeks.”

 

When will capacity re-enter the market?

Truck and trailer orders have hit all-time highs, but orders do not automatically translate into capacity. Many experts believe this new capacity will not fully enter the market until the second half of the year. As we’ve discussed in past weeks, carriers still don’t have enough drivers to fill their seats.

“The larger call-out is the trailer orders, as more carriers are looking to operate more efficiently with fewer drivers,” Maze says. “The drop trailer method is becoming a go-to for the industry, as it provides benefits for the carrier, shipper and driver. At Transfix, we saw this coming, and have doubled down on it. Adding trailers is another route to adding capacity, and more carriers and shippers are looking to take this approach, as well.”

 

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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