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  • DATVF.ATLPHL
    1.707
    -0.036
    -2.1%
  • DATVF.CHIATL
    1.840
    -0.138
    -7%
  • DATVF.DALLAX
    0.937
    0.021
    2.3%
  • DATVF.LAXDAL
    1.421
    -0.025
    -1.7%
  • DATVF.SEALAX
    0.971
    -0.035
    -3.5%
  • DATVF.PHLCHI
    1.033
    -0.036
    -3.4%
  • DATVF.LAXSEA
    2.041
    -0.059
    -2.8%
  • DATVF.VEU
    1.527
    -0.070
    -4.4%
  • DATVF.VNU
    1.404
    -0.040
    -2.8%
  • DATVF.VSU
    1.179
    -0.002
    -0.2%
  • DATVF.VWU
    1.506
    -0.047
    -3%
  • ITVI.USA
    9,646.100
    305.090
    3.3%
  • OTRI.USA
    6.600
    -0.170
    -2.5%
  • OTVI.USA
    9,653.700
    312.670
    3.3%
  • TLT.USA
    2.760
    0.020
    0.7%
  • WAIT.USA
    156.000
    -2.000
    -1.3%
  • DATVF.ATLPHL
    1.707
    -0.036
    -2.1%
  • DATVF.CHIATL
    1.840
    -0.138
    -7%
  • DATVF.DALLAX
    0.937
    0.021
    2.3%
  • DATVF.LAXDAL
    1.421
    -0.025
    -1.7%
  • DATVF.SEALAX
    0.971
    -0.035
    -3.5%
  • DATVF.PHLCHI
    1.033
    -0.036
    -3.4%
  • DATVF.LAXSEA
    2.041
    -0.059
    -2.8%
  • DATVF.VEU
    1.527
    -0.070
    -4.4%
  • DATVF.VNU
    1.404
    -0.040
    -2.8%
  • DATVF.VSU
    1.179
    -0.002
    -0.2%
  • DATVF.VWU
    1.506
    -0.047
    -3%
  • ITVI.USA
    9,646.100
    305.090
    3.3%
  • OTRI.USA
    6.600
    -0.170
    -2.5%
  • OTVI.USA
    9,653.700
    312.670
    3.3%
  • TLT.USA
    2.760
    0.020
    0.7%
  • WAIT.USA
    156.000
    -2.000
    -1.3%
Chart of the WeekNews

2019 closing on a strong note for trucking, but will it last?

Chart of the Week: Outbound Tender Rejection Index – USA, Outbound Tender Volume Index – USA SONAR:OTRI.USA, OTVI.USA

The 2019 freight market was a shadow of 2018 in terms of capacity. Spot rates hit all-time highs as carriers rejected over 25% of their contracted freight requests in June of last year. Since that time, carriers became much more compliant, rejecting as few as 3.8% of their loads in early August this year as volumes retreated and capacity grew. Over the past week FreightWaves national Outbound Tender Rejection Index (OTRI) broke 12% for the first time since January 4, 2019, a decent signal of shifting market conditions. The real question is whether this is a signal of the freight market pendulum swinging back in the direction of a 2018.

Tender rejection rates are a measure of capacity in the trucking market—measuring the rate at which carriers reject contracted freight tendered by shippers. The higher the rejection rate the tighter the market with increasing upward pressure on spot rates. Carrier’s do not reject contracted freight from existing customers without a strong reason. Most of those reasons are based on dollar amounts, either from excessive cost of re-positioning equipment or substantial revenue from higher paying freight.

Looking at truckload volumes on FreightWaves Outbound Tender Volume Index (OTVI.USA), demand is much stronger than it was a year ago, averaging over 8% higher since December 5. Demand is only one side of the story, as any economics professor will tell you. The mad dash to buy equipment in 2018 has left the market in a state of over-supply for most of the year, but is this recent tightness a sign of correction to that supply?

Two Peaks Show Direction

Trucking has two seasonal peaksone in the summer around the end of June and another in late November into December. The direction of the market can generally be gauged by the relationship between these two peaks. If the summer peak where spot rates and rejection rates are higher than the winter values, the market is softening. If the opposite occurs, like the pattern we see now, the trucking sector is in an expansion cycle.

The DAT Longhaul Van Freight Rate Index and Cass Shipments Index illustrate freight market direction for spot rates and volumes over the past 5 years. (Chart: SONAR – DATVF.VNU, CFIS.USA)

Tender rejection rates are closely correlated with spot market prices, meaning the values move together. Seeing as tender rejections have blown through their summer levels, it is safe to say once the Christmas season ends winter spot rates will have exceeded summer rates.

On the demand side, volumes have averaged over 5% higher since November 20 y/y, due to a stronger than anticipated retail showing. Freight volumes in the 4th quarter are typically driven by the retail sector, as is the general economy, due to holiday spending driven by the consumer.

But Winter is Coming

There are ongoing concerns along with the positive signals. Even with the retail continuing to excel, January is typically a dismal month in this sector. Looking at the Cass Freight Shipments Index—an index measuring total freight volumes for both rail and trucking—there is a drop every year in January. Even in years of significant growth, such as 2017-18, there is a drop in freight volumes.

The industrial sector made up of manufacturing, mining, electricity, and gas normally drives volumes in the 1st quarter as many capital goods orders are made in the 4th quarter as businesses evaluate budgets and spend cash if available. The industrial side of the U.S. economy has been in negative year-over-year growth since August according to the Federal Reserve Board.  

Another potential pitfall of this winter is the fact imported retail shipments that filled warehouses in late 2018 and early 2019 resulting from the tariff panic have fizzled, falling over 20% according to FreightWaves customs shipments data. Many of these shipments kept carriers busy this year, and they will be largely absent moving forward.

Mixed Emotions

The market is of course giving mixed plenty of mixed signals, as has been the case over the past year. The geopolitical climate has left many businesses struggling to make any long-term decisions after over-spending a year ago, but consumers are still spending as much as they ever have. The resulting volatility has taken its toll on trucking this year as trucking failures hit multi-year highs.

Volumes will decline seasonally over the next few months which will push more companies out of the space, leaving most of 2020 with less drivers on the road. The biggest question will be if demand holds through an election year where uncertainty is typically at its highest — just what the market needed.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week a Market Expert will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.

To request a SONAR demo click here.


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Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also one of FreightWaves’ Market Experts. With a degree in Finance, Strickland spent the early part of his career in banking before transitioning to transportation in various roles and segments, such as truckload and LTL. He has over 13 years of transportation experience, specializing in data, pricing, and analytics.

6 Comments

  1. Quote:
    “Volumes will decline seasonally over the next few months which will push more companies out of the space, leaving most of 2020 with less drivers on the road. ”

    Thereby further contributing to the “driver glut” .

    Since the quote above refers to drivers , there was a question that arose in my mind in regards to HOS and all the safety propaganda the industry has been being bombarded with lately .

    From my perspective , if we go back in history , just a little in regards to safety and maximum hours that should be worked per day , what were we told ? What was suggested ?

    Quote :

    “In August 1866, the National Labor Union at Baltimore passed a resolution that said, “The first and great necessity of the present to free labour of this country from capitalist slavery, is the passing of a law by which eight hours shall be the normal working day in all States of the American Union. We are resolved to put forth all our strength until this glorious result is achieved.”

    Today we have heath statistics and reports based on science and experience etc that clearly demonstrate that to remain healthy and safe a work day should not surpass 8 hours of labour per day .

    However, in the trucking industry we appear to have neglected this fact . WHY ? Since the 1800’s the working class have been advocating for this change ! Though in the trucking industry this is being neglected till this day !

    Here is a quote by the now abolished ICC :

    ” Labor wanted HOS limits of 8 hours per day and 48 hours per week. The ICC commented “there was no statistical or other information which would enable [them] to say definitely how long a driver can safely work.”

    “The evidence before us clearly does not suffice to enable us to conclude that a duty period as low as 8 hours in 24 is required in the interest of safety. We may call attention, as did the division, to the contrast between factory operations, generally sustained in character, and the operation of buses and trucks, generally characterized by frequent stops … because of conditions encountered in highway and street traffic. The monotony or nervous and physical strain of driving such vehicles is alleviated by these breaks in the periods devoted to driving, and the period of actual work is considerably below the period on-duty.
    — Interstate Commerce Commission”

    Can you believe these excuses ? But here is a question : DOES THE EVIDENCE SUFFICE TODAY ???

    Still to this day “labourer voice” , reason ,and evidence in the trucking industry is being neglected . Truck drivers have been saying that it would be safer to limit the HOS to 8 per day and no more than 48 hours per week . What hasn’t the industry and its regulators understood ?

    Furthermore , if we were to take inflation into account and be “fair” , truck driver wages should be double . So we reduce the HOS to 8 hours per day and pay them double . That’s what would be “fair and safe” without the benefit of a doubt .

    This we know as a fact . My question is what will it take for this industry to find a way to do what is right ? You regulated the ankle bracelets ,cough, I mean the ELD’s . Fine, nobody would complain if the structure of the industry were changed to work with the ELD . In fact if you limit the work day to 8 hours per day and double the wage , there would no longer be a “supposed driver shortage ” nor a “safety” issue . Drivers would be well rested .

    You have a driver drive for a maximum of 4 hours one way , switch truck and driver , and come back in the opposite direction for long haul . You would solve the “lack of parking” issue , and drivers would no longer need to sleep in the truck on highways , loads would be shipped quicker . Drivers should be paid by the hour as well . No more gimmicks .

    You would also solve the safety loophole in regards to local drivers . 8 hours maximum work day plus 1.5 hours break = 9.5 hour days maximum and ALL paid .

    8 hours of labour per day maximum is what is considered to be reasonable , health wise and for safety purposes . Breaks should be taken at no more than 2 hour intervals . Half an hour off after 2 hours of labour . You shouldn’t be in traffic for more than 2 hours straight . Why ? Because 2 hours of driving in traffic is tiring . Sitting and waiting for an hour or two is tiring . It’s still work .

    The industry could learn quite a bit from its history . At one time all it needed was a “little” adjustment ,not much to improve it , just a “little” . Today it’s out of order . Just waiting at a fuel stand for a fuel pump to become vacant can take up to half an hour . And the one’s sitting in the offices are in charge of timing the runs ??? Totally out of whack .

    In my humble opinion ……….

  2. 2019 was a broker market they make all the money specially it was hard for small carriers with less than 100 trucks its just abuse of market its always the same for consumers

  3. The dam brokers figured out that these habeebs Paco pedro and any other dam foreigner driving a truck will run there cheap 64 cpm frieght and that’s when things went down hill so what we need to work on in 20 is getting them and the dam Canadians out of here and sorry if u work for a 100 truck or less but thses little shit companys are just in the way running cheap frieght this is where we get into to many idiots and not enough frieght syndrome this will be the only way the industry as a whole will settle out and get back to normal

    1. You have clearly demonstrated your ignorance . Do you have any concept of what “competition” means ? You should due to that being the purpose for the industry’s deregulation . Deregulation occurred to induce competition and render the industry competitive . Competition reduces consumer cost . To much competition generates creativity and ingenuity aka change . Competition is a double edged sword .

      Economies fluctuate in cycles .Those cycles form “patterns” . Those patterns REPEAT and are formed due to the influence on your psychology/behavior . YOUR behavior repeats . Just like your comment is a repeat . It’s not the first time that you wrote such a comment ,word for word . And by repeating it you enforce your belief no matter how flawed it is . Anyways , monetary and fiscal policies influence your mood and actions which transition in an increase in demand and then supply and or vice versa , and this forms economic cycles . You’re just a pawn in a game you don’t seem to understand . Foreigners are not to blame . They are just like everyone else , they are influenced, used ,act ,consume , and compete .

      The big boys in the trucking industry of all nationalities have figured out that in order to remain competitive they need to influence the game in their favor at your expense . At this point in the game they figured that their competitive edge would increase by replacing drivers with autonomous technology . Currently they are in the midst of playing with regulations and applying such autonomous technology .

      You as a truck driver are facing your eventual extinction in the trade due to an alarming increase in competition . Until then and beyond , freight rates will continue to fluctuate and it has absolutely nothing to do with foreigners per se as explained above . Rates are based on supply and demand . Foreigners do not control freight rates . However, their consumption due to their mood does have an impact on demand . Demand has an impact on freight supply . If consumer psychology shifts ,so shall demand and supply .

      Currently there is an abundance of truck drivers due to a curtailment in demand and major carriers demanding more drivers to assure wages(costs) remain low . In the recent midst of the recent peak in the cycle demand outweighed supply . Rates increased along with wages and sign on bonuses . Nobody in transportation was complaining . In fact most were oblivious to what was occurring and responded with malinvestments . Those that were getting squeezed in the midst of the peak were shippers . Shippers responded by increasing price on goods . We will label that phase as inflationary . And that phase in the trucking industry transitioned into deflation , a curtailment in rates due to a decrease in demand . Economic cycles are like seasons . They transition . The only difference is man doesn’t control seasons , man simply labeled them . However, man controls economic cycles because economic cycles are man made . Understand ?

      Labour unions do absolutely nothing unique in this day and age . They simply form groups and argue with employers for employees to be treated a certain way and to be compensated a certain price . If they don’t get their way they then threaten to cause an employer hardship . They argue on the basis of democracy . However, democracy is flawed . If 9 people out of 10 are stupid and collectively decide to agree to do something stupid , the smart one is stuck with the “democratic” decision of the 9 stupid one’s . And a lot of union’s tend to do stupid things . They can also persuade their groups to vote a certain way in regards to their political desires in an attempt to fill an agenda etc. They are constantly fighting with corporations for power .

      Since labour unions have been created , the income inequality gap has widened . Yes indeed some have managed to increase the quality of life for some , and there are more labour unions today along with members than ever before in history . However, the income inequality gap has increased .

      Quote:

      “The higher the U.S. income group, the larger the share of that income is derived from investment profits. By contrast, Americans who are not among the ultra-rich get the vast majority of their income from wages and salaries.”

      I just told you the economy is rigged . The ultra rich obtain a larger portion of their income from a rigged economy .

      Typical labour unions are always going back to renegotiate . From my perspective , if they negotiated well once , they wouldn’t have to keep going back . The way their scheme is structured is flawed .

      In conclusion , your hypothesis is flawed . Rendering carriers bigger than they already are will simply render them more powerful , to big to fail , and step on you in the process ,not increase your wages at fair value as you tend to believe . Keep in mind that the current mess the trucking industry is in is due to major carriers which influenced the way things should be done .

      In my humble opinion …………..

    2. The wage/rate stagnation is because of rampant employee classification.
      Government is to blame for lax enforcement of the 1099 independent contractor pay scheme for “employees” without work authorization.
      Also uneducated LEASED “owner operators” being employees with truck payment and higher tax bills.
      True owner operators work for themself.

      Everyone wants to be “CEO of themselves” as 1099 contractors even the undocumented immigrants with no work authorization.

      The system is broken.
      Path to citizenship will lead to wage inflation for all, including immigrants.
      But business loves the underground economy. CHEAP LABOR. Politians have too much to lose.

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