Rates Finally Begin to Plateau
At long last, volumes and rejections actually fell last week, settling into something of a plateau. Rail rates are still climbing, and 7-day ocean bookings are still at 150% YoY, indicating the truckload market will stay tight, as it moves through both heightened and reduced periods going forward.
“As we talk to more of our dedicated carriers in major metro areas, such as Ontario and Harrisburg, we continue to hear the same issue: They need to fill their seats,” Justin Maze, Transfix’s senior carrier account manager, says. “Drivers and equipment are becoming harder and harder to capture in this historic market. On the other end, shippers are acting fast by locking in as much trailer capacity as they can entering the holiday season, which will enable them to operate more efficiently and secure capacity ahead of time.”
In all ways, 2020 has not been ordinary. The chart below illustrates the atypical rate patterns since May, when compared with the cycles of the past few years.
The Outbound Tender Volume Index (OTVI) currently sits at 15,056, which is 5% lower than the beginning of October and nearly 3% off last week. This is the lowest non-holiday value since mid-August, but it is still well above each of the previous two years, Seth Holm reports for Freightwaves.
Rejections generally lag a bit behind volume, but the recent volume decrease is already having an effect, flattening tender rejection rates nationwide. This week marks the first real cool down of the Outbound Tender Reject Index (OTRI) since the second week of September. Nationally, tender rejections are down more than 5% since last week. Although trending better for shippers, capacity is still very difficult to secure right now.
“When it comes to seasonal market shifts, I firmly believe rates have peaked and will stay even through the remainder of 2020,” Maze says. “Shippers have taken actions to slow leaks, but they have certainly not stopped them. Rates have done nothing except shoot up during the past four months, forcing shippers, brokers and carriers to operate in new ways, as we all try to solve the most basic supply and demand issue. There is no end in sight for 2020, but 2021 could unleash an entirely different market.”
Spot Market Rates Break Records, Pause
With supply-chain disruptions still pushing freight to the spot market, the national average spot van rate hit a record high during the week ending Oct. 4 — $2.46/mile — and the overall number of available loads increased 5% compared with the previous week, according to Overdrive.
However, while the rates remain at record highs, the spot market has slowed its rise a bit. “A slowdown in the rise of spot rates could mean contract truckload rate hikes may come in 2021, as opposed to the last months of 2020,” William B. Cassidy writes for JOC.com. Data on prices paid by U.S. shippers show truckload spot rates rose quickly from May through August, then slowed their climb last month.
“Slower growth off record highs means the U.S. truckload spot market is still in unprecedented territory, and no one expects spot pricing to begin a descent,” Cassidy writes. “But a pricing plateau would allow shippers that have been driven to the spot market for capacity a chance to catch their breath. Year over year, however, the JOC.com national average is still up 31.5%.”
Potential PPP Loan Forgiveness for Small Carriers
The U.S. Small Business Association has unveiled Form 3508S, a simplified loan-forgiveness application for those with loans of $50,000 or less through the Paycheck Protection Program (PPP). (They also posted instructions.)
According to Overdrive, more than 100,000 trucking companies received PPP loans. Most owner-operators and small fleets who participated in PPP will qualify to use the new form, “meaning a virtual guarantee of turning their loan into a grant,” Max Heine writes for Overdrive. PPP was set up so those who met certain criteria would be eligible to have their loan forgiven, while others would have to repay the loan with low interest. Since the program began, however, the criteria for forgiveness have been elusive. Form 3508S provides a list of criteria regarding borrowers’ use of PPP funds.
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.