Capacity Tightens, Volumes Remain Strong After July 4
Although volumes have dropped back down from the historic highs of last week, they are still higher than any previous year and just about where we were in mid-June.
“Capacity felt loose Monday after the July 4 holiday weekend, but then continued to get tighter,” says Justin Maze, Transfix’s senior carrier account manager. “Rates also rose through this week. Unpredictability in the freight market continues, but for the coming week, we expect continued tight capacity throughout the country, especially in Texas, California and several Northeastern markets. As demand jumps in different major markets, such as Dallas/Fort Worth, we could continue to see the domino effect contributing to overall tightness nationwide.”
“There is little evidence that suggests freight volumes will not continue to be elevated, as the [Outbound Tender Volume Index (OTVI)] bounces back from holiday disruption,” Seth Holm writes for Freightwaves. “Consumer spending is still relatively strong given the unemployment backdrop, and consumer confidence partially rebounded in June. Time will tell how much the resurgence of the coronavirus outbreak affects freight volumes.”
Tender Rejections Stay High
Long-haul tender rejections are still close to 25% in some California markets, continuing to draw in capacity from other markets and creating a domino effect that tightens capacity in all markets, Maze reports. The Outbound Tender Reject Index (OTRI) remains high at 15.9%.
“We believe the capacity crunch will remain in most markets through next week, as tender rejections remain high, keeping rates elevated,” Maze says. “Week over week, we saw just about every major freight market have no or very little decline in tender rejections, with the exception of Dallas. This starts to buck the seasonality trend of markets feeling looser coming off the July 4 holiday. Until we start to see tender rejections decline in major markets, rates will remain elevated, and capacity will remain tight.”
PPP Application Period Extended; Program Has Big Effect on Trucking
Since our most recent report on the SBA’s Paycheck Protection Program, the president signed into law the “Paycheck Protection Program Extension Act,” which extends the application period for loans provided by PPP until Aug. 8. This means companies with fewer than 500 employees can still apply for potentially forgivable PPP funds.
“PPP loans may have prevented a trucking capacity crunch in June by keeping a large number of truck drivers paid, if not always behind the wheel, when freight demand plummeted during the COVID 19–linked business shutdowns of April and May,” William Cassidy writes on JOC.com. “It also demonstrates the importance of the PPP program … to maintaining an adequate supply of trucks for shippers during an economic recovery that is more likely to stutter than roar, as the COVID-19 pandemic continues to spread.”
According to JOC.com and Jason Miller, associate professor of logistics at Michigan State University, approximately $7.6 billion in PPP loans of $150,000 or more was disbursed to 11,738 trucking companies. “About 43% of the trucking PPP recipients … were local, general freight haulers that received about $2.8 billion. Another 25% were long-haul truckload carriers that received $2.2 billion, while 319 LTL carriers received $294.3 million.”
With the uncertainty and volatility surrounding the US economic recovery, shippers need a partner that can help them adapt and excel in uncertain times. Transfix’s leading technology and reliable carrier network were specifically developed to help shippers adapt to changing transportation needs. As a part of our ongoing market and COVID-19 coverage, we’ll continue to provide breaking news, resources and insight into emerging trends and the pandemic’s impact on the transportation industry.