Freight Market Update: Carriers Regain Pricing Power
Current Market Conditions
The FreightWaves Supply Chain Pricing Power Index stands at 40, indicating that shippers still hold the upper hand in negotiations with carriers. However, the index is expected to remain steady over the next three months, suggesting a potential shift in the balance of power.
Seasonal Slowdown in Volumes
The truckload market is experiencing a seasonal drop in volumes, exacerbated by Christmas and New Year’s falling on Wednesdays this year. While the drop is expected, the question remains as to how significant the recovery will be after the first of the year.
National Freight Demand
The Outbound Tender Volume Index (OTVI) has dropped significantly over the past week, falling by 5.4% week over week. Compared to this time last year, tender volumes are down 2.43%. Long-haul volumes have been less affected, with a decline of 2.1% week over week, while local volumes have seen a more significant drop of 11.1%.
Contract Load Accepted Volume
Contract Load Accepted Volume (CLAV) has seen a less pronounced recovery, rising 6.9% over the past week. Compared to this time last year, CLAV is down 6%. This suggests that carriers are becoming more selective in the loads they accept.
Retail Sales Data
Early reads on spending in November were strong, with Bank of America’s card spending report showing a 0.6% year-over-year increase. Expectations are for sales to grow by 0.5% month over month.
Market Trends
The majority of markets have experienced lower volumes over the past week, with only 47 of the 135 freight markets tracked within SONAR seeing tender volumes increase. The largest markets in the country, including Southern California and Dallas, have seen volumes increase, while Atlanta and Chicago have experienced declines.
Mode-Specific Trends
The dry van market has been leading the way lower, with the Van Outbound Tender Volume Index falling by 5.8% over the past week. Reefer tender volumes have seen a less severe decline, with the Reefer Outbound Tender Volume Index declining by 0.7% over the past week.
Capacity Side of the Market
Tender rejection rates have been soaring over the past week, with the Outbound Tender Reject Index (OTRI) rising by 286 basis points to 9.34%. This is a sign that the market is tightening, especially after the beginning of the first couple of months, when seasonal weakness will likely appear.
Spot Rates and Contract Rates
Spot rates have retreated from their peak, but the recent upward trend has set the baseline higher for the next two weeks. The National Truckload Index (NTI) fell by 9 cents per mile to $2.43, while the linehaul variant of the NTI (NTIL) experienced a slightly smaller decline. Initially reported dry van contract rates have fallen off their recent high, returning to the range they have been in for much of the year.
Outlook
As the spread between spot rates and contract rates continues to narrow, the market will feel significantly tighter, especially in lanes where the spread between contract and spot rates is significantly narrower than the national average. With the responsiveness in rejection rates and spot rates, contract rates will likely increase in 2025.
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