Transfix Take: Midweek Market Update (Jan. 12)

Transfix Take Podcast | Ep. 32 (Week of Jan 12)

2022 Favoring Carriers, as Rates Climb

Carriers welcomed the new year with record-high spot rates, as more contract freight was rejected. On the other hand, shippers started 2022 with truckload freight markets as tight, if not tighter, than any period in 2021, leaving them scrambling to find capacity and look for new solutions to keep things moving. 

Every region in the country saw rates climb fast in the past two weeks, but the Midwest stood out for shippers experiencing extra difficulty. Reefer freight volume has taken off like a rocket in the past three weeks, and 50% of reefer contract freight is now being rejected. National load-to-truck ratios (LTR) doubled week over week, and they are now sitting at 10-plus loads for every truck. The carrier-favored market we’ve been in since the beginning of the pandemic is driving forward unabated. Even as the overall volume in the market remains lower than before the holidays, spot-load postings on the DAT are 70% higher year over year. 

Weather and COVID Largely to Blame for Capacity Crunch

Weather and COVID share much of the blame for the lack of capacity nationwide. Weather continues to displace capacity throughout the country, flashing back to last February’s polar vortex. Winter storms from the Pacific Northwest to Tennessee and up to the Northeast have not only displaced capacity, but they also closed facilities, kept freight on equipment longer than expected, left capacity stranded on highways, and brought commercial vehicle restrictions on highways that serve as arteries for freight transportation.

The surge in COVID cases is affecting drivers, as well as workers up and down the supply chain. “COVID-19 positivity rates are climbing rapidly among longshore workers and office workers at the ports of Los Angeles and Long Beach, and while labor availability has not yet been affected, the head of the employers’ association said the worst is yet to come,” Bill Mongelluzzo writes for The Journal of Commerce online.

“The next two weeks are going to be horrible,” Jim McKenna, president of the Pacific Maritime Association, told JOC.com. 

West Coast longshore workers saw a COVID positivity rate of nearly 67% last week, and about 80% of those who tested positive were in Southern California. The positivity rate has been climbing for about two weeks, and there doesn’t seem to be an end in sight, as “employers suspect that the daily number of reported cases is greatly understated, as many workers have yet to report the results of tests they have taken since the holidays.”

As we noted many times in 2021, any new negative impacts to capacity will be exacerbated in current market conditions. For example, the week before New Year’s saw a lot of freight that could not be moved and ended up carrying over to 2022, when capacity was no better. This snowball effect is joining problems brought by weather and the pandemic, leaving shippers battling with more capacity displacement. 

Shippers are also struggling with imports, and the new year brought no signs of port relief in California: More than 100 ships continued to wait to enter LA–Long Beach, and the average wait for berth space for ships arriving into Los Angeles hit a record 23.4 days last week. Shippers are still diverting freight to the East Coast to bypass delays, so major port markets there are experiencing increases in volume, which has started to affect the truckload side.  

It’s difficult to say if shippers will see relief in the near term. During the past year, we have talked about drivers moving from large fleets to smaller fleets or running on their own. According to FTR Transportation Intelligence, in 2021, we saw more than 110,000 new carrier MCs authorized — that’s a record and almost double the number from previous years. However, this does not represent more drivers, which is what the industry needs. The average driver age continues to rise, and the industry is struggling to replace retiring drivers with new entrants. Additionally, the industry is plagued with inefficiencies, and better implementation of technology and data should help ease capacity. Solution-based partners are shippers’ best tool to deal with these volatile markets. 

The movement of freight is changing in every mode, as shippers do their best to keep up with record demand while fighting congestion at multiple points throughout the supply chain. Shippers who think forward, use data and think outside the proverbial box on solutions, while partnering with companies such as Transfix, will come out of this ongoing freight rally in a better position and well ahead of competitors. The one huge win through this pandemic has been speeding up the digital transformation of the transportation industry.

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.

This communication may contain certain forward-looking statements that are not statements of historical facts. All such statements are based on current expectations as well as estimates and assumptions that, although believed to be reasonable, are inherently uncertain. These statements involve numerous risks and uncertainties, and actual results may differ materially from those expressed in any forward-looking statements. We undertake no obligation to update or revise any of the forward-looking statements contained herein, whether as a result of new information, future events, or otherwise.