Transfix Take: Midweek Market Update (June 8)

The midweek market update is a recurring series that keeps shippers and carriers informed with market trends, data, analyses, and insights.

Transfix Take Podcast | All Eyes Return to the Ports 

Jenni: Hello and welcome to a brand new episode of the Transfix Take podcast, where we are performance-driven. It's the week of June 7, and we are here to bring you news, insights, and trends for shippers and carriers from our market expert, Justin Maze.

Maze, we have reached the 100th episode threshold. What's going on?

Maze: Hey Jenni, it's great to be back with you this week to record episode 101. There's still a little bit of volatility in the market, so let's get into it.

Jenni: Listen, at this point, I'll take volatility over stagnation. What's happening? I know we saw a couple of weird things in May.

Maze: That's right, Jenni. In May, we witnessed an extremely rapid decrease in rates during the first half, and capacity was extremely loose throughout the entire country, with a few exceptions in the South and Southeast markets. Towards the end of May, we experienced some volatility due to DOT Week and Memorial Day Weekend, where carriers were able to apply pressure and push up spot rates.

Jenni: It's been a while since we discussed the spot market. What's the national average there?

Maze: Well, Jenni, spot rates increased to $1.64 for line haul, which is a 10% increase from the lows we saw in mid-May before DOT Week. I'm actually surprised that carriers are still able to apply pressure now that we're in the second week of June. I anticipated continued pressure for the first few days of June, but we are seeing some relief. Rates are not decreasing as much as I expected, but they are still holding onto higher rates longer than I initially anticipated. 

 Source: FreightWaves

Jenni: You know what, Maze? This is good news for carriers. While it's a lower average compared to pre-pandemic or mid-pandemic rates, there's some improvement. What's the average line haul rate and where does it stand now?

Maze: Currently, rates are at $1.64 per mile for line haul only. However, I expect rates to gradually trend downward over the next two weeks, giving back about 5% of the increase we saw during DOT Week and Memorial Day weekend. The rate decrease will vary based on the market-to-market lane and the regions involved in the shipment's pickup and delivery.

Jenni: Alright, with that, let's move on to the regional breakdown. Maze, let's dive into it.

Maze: Let's do it, Jenni. This week, I'll change it up and start with the Southeast instead of our usual starting point in the Northeast since Transfix is based there. Over the past month, we've seen the Southeast, particularly Florida, heating up and experiencing tighter capacity, possibly due to the produce season. However, last week, I mentioned slight declines in average rates and overall capacity loosening up. This week, we continue to see the decline in rates and capacity in most Southeast markets, with tender rejections witnessing declines week over week.

 Source: Transfix

Jenni: I remember us discussing Florida specifically. So, what's happening there now and what has changed over the past week?

Maze: That's right, Jenni. Florida, known as the Sunshine State, was experiencing a freight market as hot as its weather, with drivers able to demand higher rates when leaving the state. However, things have since changed, and I believe we will continue to see slight declines over the next two weeks. While it won't be significant decreases, there will be small declines in rates.

Jenni: Alright, let's head over to the West Coast. We've observed some tightening, particularly in the Southern and Northern part of California, and there's a lot happening in that region. Let's discuss it.

Maze: Currently, we are witnessing slight declines as capacity loosens up, especially out of the state of California. On the other hand, freight heading into the West Coast, particularly California, still allows drivers to demand higher rates. However, this situation may not last much longer if we continue to observe a gradual decline in outbound rates from the West Coast. That's the situation in California. In the Pacific Northwest, Arizona tells a slightly different story. We are still experiencing a capacity crunch with rising rates in Arizona.

Jenni: Now, I'd like to take a moment to specifically address what's happening in California. Currently, we're seeing a growing number of slowdowns at various ports throughout the state due to port negotiations and longshoremen unions. As a result, we're likely to see an increase in tender rejections and a slowdown in volumes, which could lead to higher rates for carriers. However, we'll have to wait and see what happens in the next couple of weeks. That being said, let's move on to the Southern region.

Maze: The South is still under pressure, and carriers continue to enjoy higher rates entering this week. I don't anticipate much change in the following week either. The South has been fluctuating, but I believe it, along with parts of the West like Arizona, will remain relatively tight compared to the rest of the nation for the next two weeks.

Jenni: It seems like we'll have a lot to report in the next two weeks. Now, let's shift our focus to the Midwest, Maze.

Maze: The Midwest is a market where we initially expected quicker declines after the Memorial Day weekend, but surprisingly, it has remained relatively flat. However, I do expect to see greater declines in the Midwest and the Northeast compared to other outbound regions as we enter this week. Currently, freight going to the West Coast offers ideal rates for drivers, but they need to keep an eye on the market conditions in California and the rest of the West Coast since these rates won't continue to be in their favor.

Jenni: Alright, let's move on to the Northeast region, which is where we would typically start.

Maze: We anticipate slim declines in rates at the beginning of this week, followed by a gradual pick-up. Parts of Pennsylvania, such as the Harrisburg and Allentown markets, are experiencing higher volumes, resulting in marginal increases from last week to this week. However, over the next two weeks, we expect noticeable declines. The Northeast has a high population density, and most of the freight stays within the region, so it won't significantly affect rates for freight leaving the Northeast to other regions. However, I should mention that freight going down to the Southeast, especially Florida, has seen a downturn for shippers.

Jenni: That's an important point to highlight. Now, let's discuss the Coastal region.

Maze: Over the past week, the Coastal region has experienced the largest decline, and we anticipate this trend to continue throughout the rest of the month. Larger markets like Charlotte will continue to drive rates down across the entire region. Markets closer to the Northeast, such as Northern Virginia, Maryland, and Delaware, are still facing some pressure, but this will subside as the Northeast begins to decline this week as well.

Jenni: June is shaping up to be an interesting month, especially as we approach Independence Day and consider the pre- and post-holiday effects. However, let's delve into the specific situation with the ports in California.

Maze: Absolutely, Jenni. We're hearing some rumblings about the ports on the West Coast, although the circumstances are different from what we traditionally discussed during the past years of disruptions caused by COVID. On the import side, we haven't seen any significant resurgence of inbound freight due to relatively high inventory levels. In fact, I believe the second half of this year might witness a worsened ocean spot rate market through Q3.

Jenni: That's right, Maze. When we compare May this year to the same period last year, we surprisingly saw a 7.5% decrease in imports from China. This can be attributed to the strong inventory levels in the U.S. So, earlier I mentioned that this could impact the truckload sector towards the end of the year. I'm curious to hear your thoughts on this.

Maze: The noise we're hearing is primarily coming from continued labor union negotiation talks. However, it won't have much spillover impact on the truckload market because the industry, as a whole, has excess capacity. This impact will be short-lived and primarily affect the importers themselves. As the ships are turned away from the docks, the importers will have to bear the cost of storing the freight on container vessels for a longer period of time.

Jenni: I acknowledge that both Maze and I are speculating on the potential impact on the trucking sector. As of now, it doesn't seem likely. However, this situation could change towards the end of the year or in Q1 of next year, especially if the negotiations continue. Keep in mind that we're already a year into these negotiations, and if they extend into the second year, it's uncertain how it will impact the ports on the West Coast. On another note, Maze, there's another factor we need to watch out for.

Maze: You're absolutely right, Jenni. We need to keep an eye on Mother Nature as we're officially in hurricane season. Hurricanes can significantly impact the truckload market, so it's something we should monitor closely in the coming months.

Jenni: Definitely, Maze. We'll be vigilant. It's always a pleasure discussing these updates with you. We'll be back next week with a brand new episode of the Transfix Take podcast. Until then, drive safely.

DISCLAIMER: All views and opinions expressed in this podcast are those of the speakers 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 podcast are based upon information considered reliable, but neither Transfix, Inc. Nor its affiliates, nor the companies with which the participants are affiliated warrant its completeness or accuracy and it should not be relied upon as such. All views and opinions are subject to change.