Q4 Shaping Up as Stormy Season
We may be in the calm before the storm. And we’re talking about the freight markets, not another hurricane.
Though national volumes and tender rejections have held a steady line with slight gains and drops, truckload rates continued to slowly dip during the past week. All indicators point to an extremely strong fourth quarter with tight capacity, so we need to prepare for this trend to turn upward, according to Justin Maze, Transfix’s senior manager of carrier account management.
The good news is GDP grew 33%, and jobless claims beat expectations. The bad news is we still have to endure election results and the rise in COVID-19 cases, which will continue to bring uncertainty for the next few months. COVID-19 will also bring the need for a temporary supply chain to move millions of anticipated vaccines around the country. Transfix continues to keep a close eye on where and how this will affect capacity in Q4 2020 and Q1 2021.
Overall capacity has not changed much WoW. Carriers continue to work their way to strong markets, leading to the domino effect we discussed last week. The shortage of drivers has only become worse (see below). By the second week in November, Maze says, “We expect to see rates continue to climb, as markets such as Ontario and Harrisburg show no signs of slowing, but mid to small markets will begin to pay more for capacity on regional moves.”
The Outbound Tender Volume (OTVI) sits at 15,522. Freight market conditions eased during October compared with the two months prior, but capacity remains scarce and expensive.
“On an accepted-tender basis, contract volumes are running up 24% over last year,” Seth Holm writes for Freightwaves. “Last year’s peak season was strong but not record-setting, as this year is poised to be. The comps get slightly more difficult as we move into the traditional peak season, but we have no reason to believe that volumes will break down materially this holiday season.”
The Outbound Tender Reject Index (OTRI) fell steadily throughout October and is now at 24.26%, although capacity remains historically difficult to secure.
With an eye toward the remainder of the year, Maze says: “We expect markets to tighten and remain strong through November, due to the holiday season and consumer spending on retail items. The ports on both coasts (Ontario, Newark/New York, Oakland) are reporting record months, and container bookings in Asia heading to the U.S. continue to be strong. There is no end in sight, as shippers are in dire need of inventory. Public companies are even warning of potential Q4 misses due to not being able to get inventory in time because of issues such as port congestion.
“On top of the holiday peak of freight, California is battling dangerous wildfires not far from the largest freight markets in the country. This could add to the constraint on capacity; the Ontario/Los Angeles markets are already feeling this, with some shippers’ power being turned off periodically to help prevent fires from spreading. At Transfix, we have already seen multiple shippers with power shutoffs, leading to halts in operations. If this continues, it will only lead to more freight piling up as it waits to be moved.”
Driver Shortage, Insurance Costs Among Top 10 Trucking Industry Issues
The challenges faced by the trucking industry during the 2020 pandemic make up a long list. According to the American Transportation Research Institute’s (ATRI) annual Top 10 Trucking Industry Issues survey of more than 3,100 trucking industry stakeholders, the shortage of drivers tops that list for the fourth year in a row.
“ATRI says a number of drivers have left the industry due to the FMCSA Drug and Alcohol Clearinghouse taking effect this year, along with drivers retiring or leaving the industry due to COVID-related health concerns, exacerbating driver availability challenges that faced the industry in previous years,” Matt Cole writes for Commercial Carrier Journal. “While the driver shortage was ranked as the top issue overall based on all responses, it was not in the top 10 issues as ranked by truck drivers.”
Driver compensation was No. 2 on the list overall, followed by truck parking. Other issues in the combined top 10, as ranked by carriers and drivers, are: the Federal Motor Carrier Safety Administration’s Compliance, Safety, Accountability program; insurance cost/availability; driver retention; tort reform; economy; detention/delay at customer facilities; and hours of service.
Insurance cost/availability made the list for the first time since 2005, at No. 5 overall. Tort reform made the top 10 for the first time since 2011, ranking No. 7 overall.
With the uncertainty and volatility surrounding the US 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.