Markets

Freight markets see little change this week

This week’s FreightWaves Provide Chain Pricing Energy Index: 40 (Shippers)

Final week’s FreightWaves Provide Chain Pricing Energy Index: 40 (Shippers)

Three-month FreightWaves Provide Chain Pricing Energy Index Outlook: 35 (Shippers)

The FreightWaves Provide Chain Pricing Energy Index makes use of the analytics and knowledge in FreightWaves SONAR to research the market and estimate the negotiating energy for charges between shippers and carriers.

This week’s Pricing Energy Index relies on the next indicators:

Volumes fail to budge the needle

Freight demand stagnated among the many main markets this week however did see a lift from a handful of smaller seaport markets like Savannah, Georgia. The broader image of the market stays largely unchanged, nevertheless, as retailers proceed to face a lull of client demand whereas sitting on high of excessive stock ranges. Whereas it’s doable that volumes may take an additional hit from Hurricane Ian, it’s (on the time of writing) considerably doubtful that inclement climate will tip the scales a method or one other.

Tender volumes fail to impress:
SONAR: OTVI.USA: 2022 (white), 2021 (inexperienced) and 2020 (orange)
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This week, the Outbound Tender Quantity Index (OTVI) fell 0.88% on a week-over-week (w/w) foundation. On a year-over-year (y/y) foundation, OTVI is down 25.22%, though y/y comparisons will be coloured by important motion in tender rejections. OTVI, which incorporates each accepted and rejected tenders, will be artificially inflated by an uptick within the Outbound Tender Reject Index (OTRI).

Accepted volumes are beneath 2020 ranges:
SONAR: CLAV.USA: 2022 (white), 2021 (inexperienced) and 2020 (orange)
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Contract Load Accepted Quantity (CLAV) is an index that measures accepted load volumes shifting underneath contracted agreements. Briefly, it’s much like OTVI however with out the rejected tenders. accepted tender volumes, we see a decline of 0.96% w/w but in addition a fall of 10.4% y/y. This y/y distinction confirms precise cracks in freight demand — and never merely OTRI’s y/y decline — are driving OTVI to decrease ranges.

This week, the largest story within the information media is the destruction — each already seen and anticipated — ensuing from Hurricane Ian, which made landfall in Florida on Wednesday afternoon. By Thursday, the hurricane had weakened to a tropical storm because it handed over central Florida and made its strategy to the Atlantic Ocean. On the time of writing, Ian had regained its hurricane standing and was anticipated to make landfall close to Charleston, South Carolina, by Friday afternoon.

Florida is primarily a client state (also referred to as a backhaul market), provided that it has a small manufacturing base in comparison with different states within the area. The one exception to this designation is the winter citrus season, as Florida produces roughly 70% of the US’ citrus. It’s true that this 12 months’s harvest will probably face challenges from flooding and robust winds, although it’s uncertain that this crop destruction may have an outsized impact on truckload markets at giant.

Volumes fall within the heavyweight markets this week:
SONAR: Outbound Tender Quantity Index – Two-Week Change (OTVIF).
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click on right here.

Of the 135 complete markets, 71 reported weekly will increase in freight demand, although lots of the largest markets suffered steep declines.

Working example: Ontario, California — the second-largest market by outbound quantity — noticed freight demand decline 9.6% w/w. A part of this shortage is because of the dearth of imports seen at West Coast ports, which have given up market share to a historic diploma. Dallas and Houston, the nation’s third- and fourth-largest outbound markets, noticed tender volumes dip 6.8% w/w and eight.4% w/w, respectively.

By mode: Van volumes have been surprisingly sturdy this week, because the Van Outbound Tender Quantity Index (VOTVI) was up 2.28% w/w. VOTVI is however down 24.06% y/y, however that distinction is basically attributable to quickly declining tender rejections over that very same interval. Accepted van volumes are, nevertheless, down 9.14% y/y.

Reefer volumes are inarguably in a worse spot in comparison with final week, because the Reefer Outbound Tender Quantity Index (ROTVI) is down 3.74% w/w. As is the case with VOTVI, ROTVI is down 31.05% y/y largely due to declining reefer rejection charges. Accepted reefer volumes are literally up 3.95% y/y.

Rejection charges get better barely from earlier lows

Early within the week, OTRI dipped to a brand new cycle low of 5.13%, threatening to fall beneath 5%. Over the previous few months, we’ve seen OTRI run up towards a number of flooring, each seeming to be its ultimate resting place. So whereas OTRI’s actions may not be significantly noteworthy on a week-by-week foundation, they add as much as a gradual deterioration of market situations. This drawn-out decline is a battle of attrition for small carriers, particularly those who function primarily within the spot market, as they wrestle to search out appropriate margins to cowl ever-inflating working prices.

OTRI virtually broke beneath 5%:
SONAR: OTRI.USA: 2022 (white), 2021 (orange) and 2020 (inexperienced)
To be taught extra about FreightWaves SONARclick on right here.

Over the previous week, OTRI, which measures relative capability available in the market, rose to five.23%, a change of seven foundation factors (bps) from the week prior. OTRI is now 1,656 bps beneath year-ago ranges.

Regardless of the present pattern of loosening, one other capability crunch could be looming on the horizon. The reason behind such a risk is simple: Given carriers’ aforementioned thinning margins and rising prices of operation, it’s probably that we are going to proceed to see an exodus of smaller carriers from {the marketplace} as bankruptcies skinny the herd. Since firms with six or fewer vehicles make up an amazing majority (about 92%) of carriers, any shockwave amongst them shall be felt in rising spot charges and tender rejections.

But the above image is just half of the general pincer motion threatening to tighten capability. Bigger carriers will discover it troublesome to switch growing old tools, as the continued semiconductor disaster continues to disrupt truck producers’ provide chains. Working thus on vehicles which have expired previous their substitute cycle however with out a appropriate provide of latest tools, giant carriers should prioritize high-paying hundreds to offset rising upkeep prices. Provided that bigger carriers have a robust foothold within the contract market, this pattern of growing old tools will place upward strain totally on contract charges.

Capability tightens in Atlanta:
SONAR: WRI (colour)
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The map above exhibits the Weighted Rejection Index (WRI), the product of the Outbound Tender Reject Index — Weekly Change and Outbound Tender Market Share, as a strategy to prioritize rejection fee adjustments. As capability is usually discovering freight, only some areas this week posted blue markets, that are often those to deal with.

Of the 135 markets, 72 reported greater rejection charges over the previous week, although 52 of these reported will increase of solely 100 or fewer bps.

Atlanta noticed rejection charges climb 92 bps w/w, but the market’s native OTRI continues to be solely 4.55% — a far cry from the height of 13% seen a couple of months in the past. However, volumes in Atlanta are trending up and are at present at ranges final set in mid-July.

SONAR: VOTRI.USA (white); ROTRI.USA (inexperienced); FOTRI.USA (orange)
To be taught extra about FreightWaves SONAR, click on right here.

By mode: Although they continue to be unstable, reefer rejection charges have recovered from lows close to 6.5% set earlier within the month. The Reefer Outbound Tender Reject Index (ROTRI) did fall 28 bps w/w, however ROTRI stays elevated by markets like Houston. Van rejection charges, nevertheless, didn’t tip the dimensions in any respect this week, with the Van Outbound Tender Reject Index (VOTRI) holding regular at 5.14%.

Flatbeds might be the star of the week, because the Flatbed Outbound Tender Reject Index (FOTRI) gained 160 bps w/w. Key drivers of flatbed demand, like industrial manufacturing and the Buying Managers’ Index (PMI), stay elevated, which ought to present upward strain on flatbed rejection charges for the close to future. Evidently, any shock to the commercial economic system could be a crucial blow to flatbed carriers.

Spot charges climb late within the week

Knowledge from mid-September is displaying end-of-quarter decay in contract charges, that are reported with a two-week delay. On Sept. 10, contract charges fell to their lowest stage since final 12 months’s Thanksgiving. This downward pattern, which has been worsening since early August, is troubling information for carriers as they head into fee negotiations for the fourth quarter. 

Contract and spot charges are lower than splendid:
SONAR: Nationwide Truckload Index, 7-day common (white; proper axis) and dry van contract fee (inexperienced; left axis).
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Contract charges, that are base linehaul charges that exclude gas prices and different accessorials, rose 1 cent per mile this week to $2.70. Since contract charges was once renegotiated on a yearly foundation, they proved exceptionally ill-suited to the market volatility launched by the pandemic. This sluggishness to quickly altering market situations led a not insignificant contingent of shippers to barter their contracts on a quarterly foundation. Whereas these contracts are hammered out and put in place, charges sometimes rise within the interim. As knowledge is available in from early October in two or three weeks’ time, anticipate to see contract charges climb barely earlier than falling later within the month. I totally anticipate a decline in contract charges for the fourth quarter, however I additionally imagine that the following sizable drop shall be seen in Q1 2023.

Spot charges carried out comparatively effectively this week, because the Nationwide Truckload Index (NTI) rose 4 cents per mile to $2.68. These positive factors occurred regardless of knowledge from the Power Info Administration revealing that diesel costs fell earlier within the week. The true positive factors of the spot market will be seen within the linehaul variant of the NTI (NTIL), which excludes gas prices and different accessorials like contract charges. The NTIL rose 5 cents per mile this week to $1.93.

SONAR: RATES.USA
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The chart above exhibits the unfold between the NTIL and dry van contract charges, displaying the index has continued to fall to all-time lows within the knowledge set, which dates to early 2019. All through 2019, contract charges exceeded spot charges, resulting in a file variety of bankruptcies within the area. As soon as COVID-19 unfold, spot charges reacted shortly, rising to file highs on a seemingly weekly foundation, whereas contract charges slowly crept greater all through 2021. 

As soon as spot charges began the fast descent from the stratosphere in late February, the unfold between contract charges and spot charges narrowed as contract charges continued to extend all through the primary quarter. This brought on the unfold between contract and spot charges to show unfavourable for the primary time since July 2020, as contract charges at present outpace linehaul spot charges by 80 cents per mile.

SONAR: FreightWaves TRAC fee from Los Angeles to Dallas.
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The FreightWaves TRAC spot fee from Los Angeles to Dallas, arguably one of many densest freight lanes within the nation, discovered additional room to fall. Over the previous week, the TRAC fee fell 4 cents per mile to succeed in $2.61. The each day NTI (NTID), which has risen to $2.69, is as soon as once more outpacing charges from Los Angeles to Dallas.

SONAR: FreightWaves TRAC fee from Atlanta to Philadelphia.
To be taught extra about FreightWaves TRAC, click on right here.

On the East Coast, particularly out of Atlanta, charges did see progress and are nonetheless beating the NTID. The FreightWaves TRAC fee from Atlanta to Philadelphia rose 2 cents per mile this week to settle at $2.70. Charges alongside this lane have been falling since mid-July, when the TRAC fee was $3.48 per mile.

For extra data on the FreightWaves Passport, please contact Kevin Hill at khill@freightwaves.com, Tony Mulvey at tmulvey@freightwaves.com or Michael Rudolph at mrudolph@freightwaves.com.

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