Volumes, Rejections Begin to Plateau, but Rates Continue to Rise

Rates continue to drive higher, even as volume and tender rejections plateau and begin to slightly lower nationally. Transfix is starting to see divergent trends across regional markets.

“As we stated last week, we continue to see capacity loosen in the West, South and Southeast regions,”  Justin Maze, Transfix’s senior carrier account manager, says. Meanwhile, the Northeast and Midwest markets are tightening. For example, Harrisburg has a 37% tender rejection rate.

National outbound tender rejection rates peaked on Sept. 9 at 26.68% and have since trended down to 24.59% during the past seven days, Freightwaves confirms.

“Even as volumes and tender rejections slowly decline, we are still at levels well above normal, and that will keep rates elevated,” Maze says. “As shippers revisit their contracted freight for repricing, this also leads to new higher spot rates in the market. And as Hurricane Sally hits the Gulf, we could see a few smaller shifts in the freight market by the end of the month. We are keeping a close eye on all the active hurricanes and wildfires on the West Coast.”

The remainder of this month and quarter will remain tight, and rates will continue to be high, but what will the traditionally tight Q4 look like? Next week, Transfix will do a deeper dive into Q4. “We’ll look at the effects of new consumer behaviors on the holiday season, as well as the effects of Chinese Golden Week on the markets,” Maze says. “It’s safe to say there will be no traditional Q4 in the freight world, much like the rest of 2020.”

 

Spot Rates Could Go Even Higher, Pressuring Contract Rates

As rates rose from the lows of April and May, “the subsequent supply chain chaos, combined with a boom in demand for loads-producing goods like appliances, homewares, home-office-wares, exercise equipment and lumber, to name a few hot commodities, has poured freight into the spot market,” James Jaillet writes on Overdrive. “That surge in load volumes has driven per-mile spot rates to those on par with some months in 2018 — considered by many to be the spot market’s recent-history high-water mark.”

And there is no sign of rates slowing down. “Dry van spot rates passed prior-year levels in mid-June, with the gap widening since. Currently, spot rates are 38% higher year-over-year, presenting a favorable starting point for carriers negotiating renewing contracts,”  Todd Maiden writes for Freightwaves. “How long the current dynamics hold remains to be seen, but many in the industry see the current trucking bull market extending longer than in the past, as several capacity constraints persist.”

For example, Maiden writes: “Deutsche Bank’s transportation and consumer-packaged goods (CPG) equity research analysts said they see trucking rates increasing as high as 15% to 20% for CPG companies next year. Their assumption is based on their recent conversations with freight and trucking industry experts. ‘Higher spot prices trending into year-end 2020 (and putting upward pressure on 2021 contract rates)’ is their base case moving forward. The firm sees the current supply-demand imbalance lasting ‘potentially well into 2021.’”

 

August Manufacturing Expansion Predicted to Continue, if Coronavirus Allows

Manufacturing activity expanded in key areas of China, Europe and the United States in August, with economists predicting the expansion will continue into 2021.

Moody’s Investors Service changed its outlook for the global manufacturing sector Wednesday from negative to stable, driven by its expectation of a strong economic recovery in 2021. Moody’s forecasts EBITDA growth of 8% in 2021, after double-digit declines in 2020.

The J.P. Morgan global manufacturing PMI showed that manufacturing output in August rose at the fastest rate since April 2018, and new orders grew at a rate not seen since June 2018.

“The sunny outlook provided by the range of purchasing manager’s indices (PMIs) was tempered by warnings that a widespread resurgence of [COVID-19] in major economies could act to slow, or even reverse, any recovery of global production,” Greg Knowler writes on JOC.com.

 

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.

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