FreightWaves expects the Charleston, South Carolina, dry van spot market to continue gaining strength, based on what our proprietary metrics are telling us. We believe loaded TEU volumes inbound to the Port of Charleston will recover from their 12 month low in February of 70,397—March volumes have not been published yet. In 2015, 2016, and 2017, March and April volumes were substantially stronger than February.
DAT’s Rateview tool posted a 7 day moving average for dry van spot rates from Charleston to Atlanta at $2.70 per mile, up from $2.52 in February and $2.65 in March. Rates from Charleston to Philadelphia are steady, but high: $3.12 in February, $3.14 in March, and $3.15 over the past seven days.
Freightwaves’ inbound and outbound Tender Rejection Index (TRI) numbers for Charleston are rising in sync, indicating a healthy, steadily intensifying freight market. The TRI spread—outbound turndown percentage minus inbound turndown percentage—has been flat since mid-March, which suggests an equilibrium between freight and capacity in the area. A port city like Charleston is a typical headhaul market, with more freight outbound than inbound, and so it normally maintains a positive TRI spread—i.e., outbound turndowns are fairly high because there are often more loads than trucks, and inbound turndowns are normally fairly low because trucks are trying to enter the port market and are therefore willing to bring loads to the city.
That both TRI metrics are moving upward in unison is a signal of growing volumes. We believe that more abrupt jumps in turndown rates are necessary to cause sudden spot rate increases, and that hasn’t been the case here: the mounting turndown rates we’re seeing, and again, this is both inbound and outbound, are really too gradual to cause a big movement on the spot market.
However, that could change. A key metric for seeing how the Charleston freight market evolves in the immediate future is the inbound turndown rate. The inbound TRI rate—trucks rejecting tendered loads going into Charleston—can only get so high before it causes the market to roll over into a situation where demand (loads) exceeds supply (capacity). In other words, if the number of trucks staying out of Charleston keeps rising, eventually there won’t be enough trucks in the city to cover outgoing loads. If that happens, outbound turndowns should spike faster, diverging from inbound turndowns, and that steep increase in outbound TRI will be more likely to force the spot market substantially higher. In that scenario, shippers will be exposed to higher transport prices.
Another factor to consider for the Charleston freight market is Savannah, the large port about 108 miles to its southwest. Savannah is the second largest East Coast port by TEU volume after the Ports of New York and New Jersey, and handled a record 3.85M TEUs (twenty-foot equivalent units) in 2017, compared to Charleston’s 2.2M total TEUs for 2017. Because total TEU statistics include inbound and outbound as well as empty and loaded containers, those numbers are a better measure of overall port capacity and efficiency than demand for trucks. To get a better sense of the relative volumes of freight entering those ports, we have to look at loaded import containers (see the chart below):
Charleston is obviously playing second fiddle to its larger southerly neighbor. It took both ports until the middle of 2014 to fully recover from the Great Recession and achieve the same level of loaded imports they saw in the middle of 2008. Since 2014, though, Savannah has pulled away from Charleston and has grown its loaded import volume at a significantly faster rate. The chart also tells us about the relationship between Charleston and Savannah loaded import volumes: they’re fairly correlated. It’s not the case, for instance, that Charleston steals freight from Savannah or that Charleston only sees increased port volumes after Savannah has reached capacity—instead, it seems that both ports rise and fall together.
April is normally a strong month for both Charleston and Savannah, but big movements in the spot market will depend on whether enough capacity is positioned to move the freight once port traffic ramps back up.
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