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Shippers on the West Coast are no longer the only ones feeling capacity relief. It’s hitting nearly all markets across the country, even the Northeast, which was finally dealt a break from winter weather. Midway through last week, we started to see capacity ease and rates very slowly creep downward. This likely will continue through this week.
Carriers shouldn’t lose sleep over this: Rates are still around all-time highs. Keep in mind, though, high rates are also being driven by fuel (see below). Shippers are hoping rates will decrease, as they start thinking about executing freight through produce season — we think this will be doable but difficult, because we have not seen any of the easing in volume we traditionally see at the beginning of Q1. Overall volume continued to rise during the past week, but capacity is still open. Rejections are staying stagnant or even declining (FreightWaves’ Outbound Tender Rejection Index [OTRI] sat at 19.35 today).
All in all, mixed signals continue to hit truckload markets. Shippers finally feel capacity relief throughout their entire U.S. network, but they are not seeing significant cost reductions. If shippers cannot pull down rates in a big way before heading into produce season, then carriers could walk away with pricing power for the entire year. In January, we saw an unexpected increase in costs, which only furthers the hurdle for shippers to regain pricing control.
The markets to keep an eye on — and avoid — are along the northern and southern U.S. borders. As we reported last week, the flow of Valentine’s flowers tightened markets on the southern border. Meanwhile, major trade lanes up north continue to be affected by trucker-led vaccine protests in Canada. With these protests beginning to have a real effect on the U.S. supply chain — especially in the automotive sector — even the American Trucking Associations (ATA), which has raised “serious concerns” about U.S. vaccine mandates, came out against the Canadian protests, saying, “ATA strongly opposes any protest activities that disrupt public safety and compromise the economic and national security of the United States.” Notably, in Canadian markets, tender rejections have more than doubled since December — well before vaccine protests started.
Looser markets may be good news, but there is something ready to rain on that parade: fuel. Diesel fuel costs have been skyrocketing, increasing more than 10% since the beginning of January. Rising tensions in other parts of the world are affecting fuel prices here in the United States. And as fuel prices rise for carriers, they pass the cost through to shippers, resulting in higher rates even in a softening market. In addition to rising fuel prices, increasing inflation pressures are affecting both carriers and shippers.
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.
Disclaimer: All views and opinions expressed in this blogpost are those of the author and do not necessarily reflect the views or positions of Transfix, Inc. or any parent companies or affiliates or the companies with which the participants are affiliated, and may have been previously disseminated by them. The views and opinions expressed in this blogpost are based upon information considered reliable, but neither Transfix, Inc. nor its affiliates, nor the companies with which such participants are affiliated, warrant its completeness or accuracy, and it should not be relied upon as such. In addition, the blogpost may contain forward-looking statements that are not statements of historical fact. All such statements are based on current expectations, as well as estimates and assumptions, that although believed to be reasonable, are inherently uncertain, and actual results may differ from those expressed or implied. All views, opinions, and statements are subject to change, but there is no obligation to update or revise these statements whether as a result of new information, future events, or otherwise.