Volumes Continue to Rise, Rejections Hold Steady
The bull market drives on. Long haul rates have now surpassed the historic 2018 level, and they show no signs of slowing. Outbound Tender Volume Index (OTVI) rose 3.5% to another all-time high of 14,276. Year over year, outbound tender volumes are 39% above 2019 and 42% above 2018.
Last week, we saw tender rejection rates slow their climb; they even had a slight decline at one point, but then they jumped back up. While rejections look like they are holding somewhat steady, the same cannot be said of volume, which continues to climb quickly.
“We believe rejections will continue at the current levels for the remainder of this quarter, if not longer,” says Justin Maze, Transfix’s senior carrier account manager. Container rates from Asia to the U.S. West Coast are at all-time highs, because of elevated consumer demand for goods (see story below), which also will keep freight volumes high. As this freight makes landfall in the U.S., it will have to be taken around the country and repositioned.”
“Transfix sees the Northeast and parts of the Midwest as the markets with the greatest changes, though the South and West continue to be tight; we are just not feeling much WoW difference,” Mays says. “Carriers are telling us they are more and more willing to go off their beaten path to get a more lucrative rate, as they are comfortable with their ability to get freight out of markets they may not know well. This further disrupts the normalcy in the market and truck placements.” The Outbound Tender Rejection Index (OTRI) is at 21.59%, meaning more than one in every five tendered loads is being rejected at contracted prices.
“During the next few weeks, we have two big things to watch that could affect freight markets,” Mays says. “First is Brake Safety Week, Aug. 23–29. Second is whether a new stimulus package will be passed by Congress, as this could further increase consumer spending.”
US Trans-Pacific Import Demand Surging due to Pandemic
The eastbound trans-Pacific market is surging. “Not because of too little vessel supply, but because of too much import demand,” Greg Miller writes for FreightWaves. “U.S. import demand is not surging despite coronavirus, but because of it.”
While people are spending less on things such as restaurants, gas and commuting, they’re spending more on household goods, exercise and outdoor equipment, and the like, so shippers are importing more of those types of products to the U.S. right now.
As Transfix reported last week, shippers are favoring voyages from Asia to the West Coast, rather than to the East Coast. It’s simply faster to ship to the West Coast and rely on trucking to get products where they need to go. Freight weights for China–U.S. West Coast hit all-time highs this month.
“One theory is that today’s import strength partially results from cargo being brought forward from the future, meaning volumes will sink in the fourth quarter,” Miller writes.
According to the National Retail Federation, “August is expected to be the busiest month of the July–October ‘peak season,’ when retailers rush to bring in merchandise for the winter holidays.” Additionally, importers and shippers may be trying to get products moved before a second wave of COVID-19 causes more shutdowns.
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.