Weekly Market Update: Volumes stable, capacity has a hiccup

National freight volumes remain relatively flat this week as weekly volumes averaged 0.6% higher than last week. Tender rejection rates had a slight bump before retreating slightly. The increase was the first significant movement in months as they leaped 64 bps in a single day. With tender rejections being so low it does not take a lot to see a decent increase. The lower the index value goes the more sensitive it is to carrier rejections.  This uptick is interesting to see, but it does not appear to be a market-altering event as spot rates continue to remain flat as well.

The main culprits for the tender rejection increase were in the Midwest and Southwestern corners of the country where rejection rates increased over 200 and 100 bps respectively. Both have moderated since, but national rejection rates have still not returned fully to the bottom.  

Tender rejection rates and spot market rates are a far cry from 2018 levels, with rejection rates being well off mid-April 2018 levels when they were above 21%, spot rates were averaging over $0.30 per mile higher than they are now, according to the DAT Van Freight Rate Index.

Somewhat unexpectedly, volumes are averaging roughly 0.40% higher from a year-over-year perspective this past week. The volumes appear to be much different, however, as freight length of haul appears to be relatively short this year with so much activity around the ports on the coasts. California continues to see an abundance of regional freight movements with L.A. and Ontario outbound volumes holding strong week-over-week. Outbound Tender Volume Index (OTVI) values averaged less than a percent off previous week levels for each market as they continue to be the hotbed for this year’s spring freight.

Last year the market was softer in April than in March from a volatility standpoint. Tender rejection and rates declined slowly throughout the month. The market did not turn in earnest until mid-May when rejection and spot rates spiked leading into Memorial Day.   

The container boom may have softened off its peak of last year, but there has been a slight increase in spot container rates as indicated by the Freightos Baltic Exchange Index that measures the average spot rate for 40-foot containers from China to the North American coasts. This could be a seasonal correction as rates bottom as a result of the Chinese New Year (CNY) in late March/early April each year, but it is interesting to note these rates are almost 50% higher than they were at this time last year.

Many of the largest ports in the U.S. reported large gains versus March of 2018, such as the port of L.A. that was 12.65% higher in total container volume and 6.53% more loaded inbound containers. These numbers are slightly distorted due to the timing of CNY starting two weeks earlier this year. It should be noted a good amount of the March volume was shipped prior to the decision to delay the tariffs and now it appears there is less concern that any new tariffs will be imposed. This means there may be more reason to expect softer inbound volumes in the coming months as shipper reduce their inventories.