Peak Season Peaking Again
The freight market has been in a “peak” season for four months now, and as the end-of-year holidays get even closer, the frantic freight market of 2020 will get even tighter. During the past week, we have seen volumes, rejections and rates continue to increase.
“Traditionally, we see 10%–20% spikes in rates for freight that ships during Thanksgiving week, but this is another unknown in 2020,” Justin Maze, Transfix’s senior manager of carrier account management, says. “What I can guarantee is that rates will rise throughout this week. Transfix is already experiencing a huge increase in volume that shippers need to ship cross-country, as more freight is taken in by the ports.” (See below.)
With Thanksgiving this week, drivers will be seeking freight that drives them toward home, which could push rejections and spot rates higher, Seth Holm writes on Freightwaves. The Outbound Tender Volume Index (OTVI) rose to 16,195, up from 15,853 last week.
Transfix is seeing all markets heating up, with capacity continuing to tighten. Southern California, in particular, has tightened even further than it already had. With Christmas-tree season in full effect, joined by increases in produce, the Pacific Northwest has also begun to tighten. The small freight markets of the Mountain Prairie states continue to have the highest rejection rates, and winter weather will begin to have a big impact.
Tender rejections this past week set another record at 27.84%. “Many industry observers contend that there is a natural ceiling for the Outbound Tender Reject Index (OTRI), and that the market is at or nearing that point,” Holm writes. “The rationale is that contract rates will be significantly upwardly negotiated as bid season approaches given the strength of the spot market.”
While COVID-19 has been a huge uncertainty, it seems clear we are now in the second wave with potential widespread lockdowns. Many shippers are now pulling forward more inventory to deal with pandemic buying. This is quickly affecting maritime freight and will eventually affect over-the-road freight, continuing the demand for truck capacity through Q4 and into Q1.
“Usually, maritime starts to really slow around the Thanksgiving week,” Maze says. “This year, we are seeing the opposite, and volumes coming to the ports are still high and starting to spike again. Vessels are anchoring offshore waiting for port congestion to clear.”
Record Cargo Imports in Los Angeles Slowing Transportation Network
The nation’s busiest port, the Port of Los Angeles, is experiencing record cargo imports. Total volume in October was up 27% YoY and marked the best single month in the port’s 114-year history, according to Gene Seroka, executive director of the Port of LA. With retailers and manufacturers restocking empty shelves and preparing for holidays where consumers are spending more on goods than services, the typical holiday shipping peak is exaggerated this year. And all this is having an effect on the U.S. transportation network up and down the line.
“Container dwell, the time a box of goods spends on port property, has doubled to 5 days during the import surge,” Lisa Baertlein reports on Reuters.com. “Street dwell, the wait time for warehouse space, is up more than 100% to 7.1 days. And truck turn times are rising, because it takes longer to find containers inside port terminals.”
With arrivals at the LA and Long Beach ports, which lead the nation in trade with China, facing delays, “other importers and warehouse operators told Reuters that those backups are being exacerbated by a shortage of trucks that move cargo to destinations around the country.”
As Transfix reported Nov. 9, the current driver shortage shows no sign of abating any time soon, even as new and used truck sales increase. As Maze said: “A truck means nothing without a driver, and this is where you can gauge the relevance. In my opinion, capacity is going to be very slow to ramp up to current demand.”
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.