Pause is Over, Rates Start to Climb Again
The past two weeks are likely the only breathing room we’ll see through the end of 2021, according to Justin Maze, Transfix’s senior carrier account manager. Volume and rejections declined for two consecutive weeks for the first time since April, but they restarted upward growth again this week. The Outbound Tender Volume Index (OTVI) rose 3% from last week.
Carriers fled to major freight markets across the country for higher rates, reducing rejections in those markets. But this caused a domino effect of driving up rejections in mid- to small markets, disrupting supply chains. Large freight markets have not been able to handle current volumes, leading to the rate spike that pulls carriers from the smaller markets in the first place.
A capacity crunch is being felt at every level of the supply chain, exacerbated by the current driver shortage. Carriers, such as J.B. Hunt, are having a tough time filling their seats. This capacity crunch for drivers will not be fixed any time soon, especially since driving schools are still only operating at 50% capacity due to COVID-19 restrictions.
The Outbound Tender Reject Index (OTRI) fell marginally in recent weeks, which could stem from contract freight being renegotiated, rather than from capacity loosening. Seth Holm of Freightwaves writes: “Tender rejections have declined since Labor Day to 25.11%, but it is important to note that this is off of the highest value in the three-year series history (27%). Carriers are still rejecting one in four loads on a national level, and capacity remains extremely difficult to find.”
“I firmly believe rates, rejections and volumes will rise again during the last week of October and stay elevated through November,” Maze says. “Shippers should have a plan already in place — or act fast. We are already seeing shippers adjust throughout the industry, by using mini bids and pulling up the start dates of their RFPs. Contract rates have increased by double digits, and I believe this climb will continue.”
Transfix is working ahead to provide new solutions to meet customer needs in this highly volatile market. We have felt the capacity easing in some markets, such as Ontario, Harrisburg, Houston and Atlanta, but we feel Chicago tightening up. Port activity is off the charts (see below), and we are seeing that play out with spiking cross-country TL volumes from CPG and retail customers.
Record Volume at Ports Points to Brighter Holiday Season
One needs only to glance at West Coast ports to see what may be in store for both truckers and retailers for the rest of Q4.
“Retailers are restocking empty shelves and rolling out glittery holiday displays,” Donna Littlejohn writes for Los Angeles Daily News. “And consumers appear ready to shop again. Or at least that’s the outlook of the National Retail Federation (NRF) this month, as key economic trackers are on a decided upswing, including — and perhaps most tellingly — recent numbers from the country’s largest port complex, in Los Angeles and Long Beach.”
September, along with all of Q3, will go down as the busiest time in the Port of Los Angeles’ 114-year history. The LA port saw its cargo volumes increase by 13.3% YoY last month, and the Port of Long Beach reported a 12.5% jump in September container volumes. The NRF’s Global Port Tracker marked imports at an all-time high. And everything coming through these ports needs to be moved to different points across the country; it’s a good harbinger of a busy end to 2020 for trucking.
The U.S. Department of Commerce reported that retail sales were up by 1.9% in September from August, the fifth straight month of retail-sales growth at stores, restaurants and online.
“August was a record month nationwide” for ports, said J. Craig Shearman of the NRF. “Cargo numbers are a good barometer of what retailers expect. They don’t import merchandise until they feel they can sell it, so it’s a good sign of optimism.”
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.