The Transfix Take Podcast: Week of August 2
Will August Follow Non-Traditional July?
“The markets traveled a bumpy road last week,” says Justin Maze, Transfix’s senior manager of carrier account management. “Rates increased through the week even faster and higher than we anticipated.”
While tender rejections were lower than they were in May or June — the Outbound Tender Rejection Index (OTRI) settled at 21.11 on Friday — rates ended the month higher. This is not typical for July, which usually sees a lull in the freight market.
“In the Northeast, markets are still tightening due to a lack of capacity,” Maze says. “This is most likely due to the overflow of freight coming in from the extraordinary number of imports. The New York/New Jersey port has now surpassed the Long Beach port in terms of imports. It is now second only to the Los Angeles port, which as we reported last week, marked its busiest June ever.
“Markets throughout the rest of the country have stayed pretty steady. The Midwest remains tight, and the Southeast continues to loosen. The West has shifted day to day, but we believe it will heat up quickly in the coming week or two, as carriers are showing signals of moving trucks in that direction. Spot loads have begun to increase after a few declining weeks. Along with that came a higher national load-to-truck (LTR) ratio, which puts pressure on rates.”
With July veering from a traditional road, August could follow suit. “This week will start the month with softness, but the Northeast will keep tightening,” Maze says. “I suspect we will start seeing upward momentum in rates out of the larger West Coast markets, as we are already seeing volumes jump as a whole — especially for long haul. This is not a surprise, considering how high imports are, with freight that needs to move. Imports right now likely include back-to-school shipping, but it may also be shippers preparing for the holiday season. Either way, retail inventory is still low and needs to be replenished, which will result in consistently tight port markets.”
Used-Truck Prices Soar
As we reported two weeks ago, lower new-trailer orders do not reflect low demand. Case in point is the recent surge in prices for used trucks. For the first time in 20 years, the average price of a used Class 8 truck surpassed $60,000.
According to Transport Topics: “The average price for a used Class 8 soared to a new high for the third consecutive month, as June sales climbed year over year amid the lowest inventory levels yet in this cycle, ACT Research reported. The price hit $61,219, or 51% higher compared with $40,449 a year earlier.”
“The fact is, there is no let-up in the amount of stuff people want and are willing to pay for and are trying to get,” ACT Vice President Steve Tam told Transport Topics. “The ports are all jammed up. The railroads are having a horrible time with intermodal. The containers are all in the wrong place, and they can’t get them to where they need them to be in order to use them.
“The natural substitute is truck, but yet we are beset by a lack of trucks, lack of drivers. It’s just keeping things really, really tight, which is boding well for the used-truck market.”
More unknowns are happening every day around the COVID-19 pandemic, and we know this translates directly to unknowns in the freight market. The pandemic’s unpredictable disruptions are probably not over. Transfix is here to help our carrier and shipper partners prepare. We are continually monitoring even tangentially related markets and data to develop the most forward-thinking perspective on the future freight market.
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