While most major markets continue on the same August trendline we’ve been reporting, there has been a slight change in direction for national tender rejections and volume. Rejections climbed 2% nationally, coming off a decline at the beginning of the month. The Outbound Tender Rejection Index (OTRI) sat at 22.35% on Friday.
The Northeast is still the hottest freight market. Rejections in the region climbed by 4.5%, and Hurricane Henri will surely further strain the region. This weather event will most likely drive up rates and further constrain capacity, as more freight shifts to spot, and carriers increase prices.
Shippers are also struggling with coverage in the Midwest, especially considering some of the rail issues we are seeing. This has already had an impact on freight from the Chicago market, with more volume shifting to over the road due to rail yard congestion. Last week, we saw mild pressure on rates, and volume kept climbing throughout the entire Midwest.
Shippers should try to take advantage of looseness in the Southeast, West and South. The West continues to see increases in volume, but it has not yet translated to higher rates, due to much of the volume remaining on shorter hauls — this may be short-lived.
The congestion we see in the different parts of the transportation chain are putting upward pressure on volume, rates and rejections. For the past year, we have been calling out congestion at the ports, which is not getting better.
“Warehouses are overflowing, rail yards and carriage are maxed out,” Gene Seroka, executive director of the Port of Los Angeles, told press last week. “Chassis and containers continue to be hard to come by. Ships are coming in and waiting at anchor to get worked, and factories are behind in orders, even though output is at record levels. … Early data for August shows that 90% of arriving vessels are headed straight to the parking lot. Average wait time at anchor remains steady at five days in the month of July compared with a peak of eight days back in March. However, August anchorage times look to be increasing, and we’ll be watching this very closely. There’s a similar story on dwell times. The dwell on container terminals continues at its peak of about 5.3 days. On-dock rail time is running over 13 days, a new high. And the warehouses are filled … Street dwell time is at about 8.3 days, close to its spring record of 8.8 days.”
As if port congestion weren’t enough, rail congestion is at all-time highs, affecting multiple rail lines and yards. This will shift more volume to over-the-road. We are already seeing a huge shift in ports of entry, as imports move to ports closer to their final destination to avoid reliance on rail.
It’s the last full week of August, and everyone in the freight industry is asking what comes next. A huge supply-and-demand imbalance, combined with congestion throughout the supply chain, means it’s almost certain market conditions will continue to play in carriers’ favor and be a headache, at best, for shippers. COVID is making a resurgence worldwide; we are watching for how it will affect U.S. freight markets in the future. Congestion, no matter in what part of the supply chain, will continue to break the supply-and-demand balance as we head into the peak retail season — especially with little change being made on the supply side. Shippers are certainly feeling this, as some are already taking action to ensure they have inventory on the shelves for the holidays. Walmart even chartered their own container ship to gain more control of their imports.
This week, we also strap in for national Brake Safety Week, through Aug. 28. While this should not have a very measurable impact on an already overloaded market, any small jerk in such a fragile market requires additional monitoring and considerations.
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.
With the uncertainty and volatility surrounding the U.S. 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.