Freight Market Insights: A Shift in Power Dynamics
The FreightWaves Supply Chain Pricing Power Index remains at 40, indicating a balanced market where shippers and carriers have equal negotiating power. However, with the holiday season upon us, identifying significant changes in direction is a challenge. This year’s unique holiday schedule, with Christmas and New Year’s falling on a Wednesday, creates operational challenges for shippers.
National Freight Demand Takes a Hit
The Outbound Tender Volume Index (OTVI) has declined by over 31% in the past week, but this drop is largely attributed to the holiday schedule. The first week of January will provide a clearer direction for volumes. Historically, the first two months of the year are the softest periods for freight, and there’s no indication that this year will be different.
Regional Performance Varies
While nearly all freight markets experienced declines, Los Angeles and Atlanta outperformed the national average, with volumes falling by 29%. The only four markets that saw increases were Grand Junction, Colorado; Fargo, North Dakota; Rapid City, South Dakota; and Bristol, New Hampshire. These increases ranged from 1% to 330% higher week-over-week.
Mode-Specific Trends
The dry van market experienced a more significant decline than the overall market, with the Van Outbound Tender Volume Index falling by 34%. Reefer volumes, on the other hand, remain strong, with the Reefer Outbound Tender Volume Index declining by 21.2%. Compared to this time last year, reefer tender volumes are up 3.4%.
Tender Rejection Rates Spike
Tender rejection rates briefly broke above 10% for the first time in over two years, but have since retreated. The Outbound Tender Reject Index (OTRI) rose by 35 basis points to 9.69%, indicating a tighter market. The map above shows the Outbound Tender Reject Index — Weekly Change for the 135 markets across the country.
Spot Rates Hold Steady
Spot rates haven’t declined significantly, and the growth over the past two months suggests carriers have regained some pricing power. The National Truckload Index rebounded, rising by 3 cents per mile to $2.46. The linehaul variant of the NTI (NTIL) experienced a slightly smaller increase, rising 2 cents per mile to $1.91.
Contract Rates and the Spread
Initially reported dry van contract rates, excluding fuel, fell off their recent high, returning to the range they’ve been in for much of the year. The spread between the NTIL and dry van contract rates is trending back to pre-pandemic levels, narrowing by 14 cents over the past week to 37 cents.
Lane-Specific Insights
The SONAR Trusted Rate Assessment Consortium spot rate from Los Angeles to Dallas continued its increase this week, while spot rates from Chicago to Atlanta have been volatile but remain relatively stable. These lane-specific trends highlight the complexities of the freight market and the need for shippers and carriers to stay agile.
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