The midweek market update is a recurring series that keeps shippers and carriers informed with market trends, data, analyses, and insights.
Jenni: Hello and welcome to another episode of the Transfix Take podcast where we are performance driven. It's the week of June 28, and we are bringing you news, insights, and trends for shippers and carriers from our market expert, Justin Maze.
Maze: Hey Jenni, it's great to be back with you again this week as well. All to talk more about freight, especially as we head into the end of Q2 and into the 4th of July holiday weekend.
Jenni: That's right. And that's arguably one of the last times that we have to see if the market is going to flip and for how long. But that said, it hasn't really been that much of a summer, Maze. I think it's torrential downpours all across the East Coast.
Maze: That's right, Jenni. This week across the East Coast, we're experiencing a lot of major storms which is definitely causing some chaotic traveling for people flying via airplane. But overall, the freight market for the truckload sector is not seeing many pain points on the East Coast, but the same cannot be said for the West Coast.
Jenni: At this point, the West Coast really seems to be on an upward trajectory. What do you think, Maze?
Maze: Exactly, Jenni. It's more of the same that we reported on last week. We are seeing the traditional seasonality trends where the Southwest and West Coast are continuing to heat up while the East Coast is really sitting in the shipper's favor. But as you mentioned, that will change in the coming days as we head into the 4th of July weekend.
Jenni: Which, to me, always signals that the spot market is going to start swinging and tender rejections are going to start going up. What say you, Maze?
Source: Transfix
Maze: That's right, Jenni. We're already starting to see more spot market activity. The dry van tender rejection is sitting right at 3.7% as we drive into this week, and that is continuing to see slow increases week over week, but still very low compared to what we drove through throughout the Pandemic. But if we go and jump over to the reefer side, reefer tender rejections are sitting over 5%. But more notably, tender rejections in the Southwest and West are as high as 10%.
Source: FreightWaves
Jenni: Wow, that is quite a large percentage.
Maze: And this just really showcases the seasonality impact that we are starting to see come alive again after the roller coaster ride of the freight markets throughout the Pandemic.
Jenni: Yeah, Maze, produce season is definitely a trending topic in the supply chain right now. We just had a conversation with JOC's Cathy Roberson about produce season, and I think we had a breakthrough about what it could look like in the future. So listen up there. But you know what, it's time for the regional breakdown. Why don't we get started with where it's heating up most? The West Coast.
Source: FreightWaves
Maze: Out in the West Coast, we're still seeing pressure. Rates are still increasing in aggregate, but not as much as they were prior to this week. Now, Southern California and Arizona are definitely continuing to move in the carrier's favor, but shippers can find some relief on freight that is staying local or short haul. But if it's going out past 250 miles, you're likely going to continue to experience the same pressure you witnessed last week.
Jenni: And who can blame carriers if rates are that high on the West Coast. Now let's move over to the South. What's happening there?
Maze: It's a mix of two stories. Yes, we are seeing tightness along the border in markets like El Paso and McAllen, but some of the larger markets by volume like Houston are actually still seeing some relief, and more specifically, freight that is staying local between the Texas triangle of Austin, Dallas, and Houston. We're seeing relief for shippers.
Jenni: Yeah, Maze, navigating those border markets is certainly going to be interesting to watch, especially as we jump through the July 4th weekend. But why don't we talk about what's happening over in the Northeast?
Maze: Now, the weather is not so great this week, but the freight markets are still very soft and not seeing any impact. Rates are going to continue to stay pretty stagnant, I believe, throughout this week as we approach the 4th of July weekend. And last week, we really didn't see too much movement up or down, regardless of the lane. But there are pockets of the Northeast that did show a little bit of tightness, and that's in the Long Island area and Connecticut. But those are much smaller markets with very low volumes of freight. The major markets such as Elizabeth, New Jersey, and Harrisburg, Pennsylvania, that really drive the volume in the Northeast, continue to remain relatively flat week over week.
Jenni: And of course, I'm sure we'll see a jump there in the next week or so. That said, why don't we head down I-95 and head into the Coastal region.
Maze: Overall, we're seeing loosening mainly in the largest volume market, which is Charlotte, North Carolina. I don't think we're going to see too much softening or tightening other than what we would expect going into the 4th of July weekend. Earlier this week, I think shippers have to take advantage of it because just like every other region, as we get to the tail end of the week, we are going to see that tightening regardless of what region you're in. But for right now, the coastal region is a region that is more favorable to shippers.
Jenni: It's interesting. It literally is a battle between the East and West.
Maze: The only caution I would have for outbound freight of the Coastal region is stuff going down to Southern Florida or cross country to California. And that's a new call out because over the past few weeks, freight leaving the Coastal region going cross country was actually very favorable to shippers, but that has started to take a turn.
Jenni: Great callouts there, Maze. Now let's take our final stop on I-95 with the Southeast and hit up Florida.
Maze: Like I mentioned, Florida flipped. Florida is continuing to see decreasing rates as capacity continues to loosen, but other markets to watch are definitely going to be Atlanta, Georgia, as Atlanta, Georgia is one of the top three volume markets at any given time. We saw a few weeks of loosening this past week. We saw very slim tightening, but overall, I think we're going to continue to see the Southeast loosen, whether it's Tennessee, Florida, or Georgia. The two states to be cautious about right now are Alabama and Mississippi due to the major storms we experienced this week.
Jenni: And without further ado, our final destination in the Midwest. What's going on over there, Maze?
Maze: Well, it's a mixed story, but looking at the markets that really drive the volume out of the Midwest, we remained relatively flat, such as Columbus, Ohio, Chicago, Illinois, even St. Louis, Missouri. The freight markets haven't really tightened or loosened too much ahead of the end of Q2. But obviously, if you jump out to the more remote areas of the Dakotas or Nebraska, you are starting to see some tightening as there's less volume being driven to those markets right now.
Jenni: Okay, so July 4th this year falls on a Tuesday, which means that we have a longer than normal weekend for this type of a holiday. Maze, tell me what you're thinking in terms of where this compares or where this will compare from last year and what we'll see this year.
Maze: Well, Jenni, what I anticipate this year is going to look very similar to what we experienced last year for the 4th of July weekend, where rates rose about 5% in aggregate from this point in time, the Tuesday prior to that weekend up until the 7th of July. Now, we saw the tightening of capacity exist for a few days after the 4th of July weekend, which is always going to happen as you have the hangover effect of freight that was pushed to ship after the holiday weekend as some facilities close. This year, the 4th of July is on a Tuesday, and I think that's actually going to push more freight later into the week as some facilities close both Monday and Tuesday.
Jenni: Another great callout because I wasn't factoring in that Monday would be a holiday as well.
Maze: So in all, I do believe that we are going to start seeing capacity tighten up going into Thursday, depending on the length of haul throughout the weekend and Monday and Tuesday, the drivers that remain on the road are going to see higher rates in their favor.
Jenni: And what about the days post-4th of July weekend? What are we looking at there, Maze?
Maze: We're still going to see tightening capacity, but rates will rapidly decline back to where they are this week. And the reason I say that is because, Jenni, I believe we found our new normal for the time being.
Jenni: Well, you know, I'm going to follow up with: What exactly do you mean by the new normal?
Maze: Well, what I mean by that is we saw the bottoming of rates, and that was in the beginning of May. I don't think we will experience that again this year. To me, the data is showing that where we are right now as we speak is a potential new normal. And I say that because looking prior to May, we were just below where we are today. Today, by the way, we are at $1.62 average for the national line haul. We saw a dip in the beginning of May, then expanding rapidly upward due to DOT week and Memorial Day weekend. And unlike last year, we didn't go down to the lows we saw prior to Memorial Day weekend. And that's why I believe that this is that new normal for the time being. I do believe we are going to be seeing some increases that we would normally see for the 4th of July weekend, but then after that, we're going to see those decreases within the first ten days after the holiday back down to where we are currently right now. Thankfully for drivers, I don't think we'll ever reach that low we saw in the beginning of May.
Jenni: Now Maze, I got to say that is a big bet that I would normally make you bet the house on, but given the state of the industry, I'm going to let you slide for a little bit and just hold Paul to that. That said, I know that July 4th is going to be one of the last big market shifts that we could potentially have given anything happens weather-wise until Labor Day. So it looks like the market is going to continue to stay soft until then and really be more in favor of the shippers. Maze, I'm curious, do you have any thoughts on where we stand for Q4? I know it's a little early.
Maze: Now, my prediction for Q4 really hasn't changed, and I think we're going to be in a soft market for the remainder of the year, but we're going to continue to keep our pulse on the market and what we believe may turn the corner for carriers. And the one thing I will call out, Jenni, the gap between spot and contract rates continues to narrow. That kind of hints that we're not going to see the market go back to the lows we saw back in May, and that's why I double down that where we are right now is most likely going to be that stagnant normal for the time being.
Jenni: Well, we will definitely check back and see where you stand a little closer to Q4.
Maze: Well Jenni, I hope you and everyone else out there has a great 4th of July weekend and really gets to enjoy it. And thank you to all the drivers out there that continue to move freight around the country regardless of the holiday.
Jenni: That's right, we cannot thank you enough. That said, we will see you next week with an all-new episode of the Transfix Take Podcast. Until then, please remember to drive safely and enjoy the July 4th weekend.
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