According to FreightWaves national Outbound Tender Volume Index (OTVI) and rail volume data that measures domestic loaded intermodal container moves (ORAILDOML), the freight market hit a bottom around the middle of April. The OTVI hit its lowest non-national-holiday point in its two-year history on April 16 of 8,439, 13% below previous year. Domestic container volumes had a similar result, moving 20% under 2019 in the same week. Since then, long haul freight has outpaced shorter haul freight growth by a wide margin. The length of haul can tell us a few things about how the freight market is recovering and what stage it is currently experiencing.
Traditionally, long haul freight that moves more than 800 miles is replenishment freight. Replenishment freight is what moves from national warehouses, normally around the coastal cities and main border crossing areas, to regional distribution centers (DCs) before moving to their final point of consumption either in a store or to the end user. The COVID-19 outbreak has eliminated some sections of the supply chain for “essential” freight, with orders bypassing intermediate stops along the journey to final destinations to save time.
During the initial wave of the pandemic hitting the U.S., freight volumes surged 30% in three weeks in March. Freight moving less than 250 miles outpaced longer haul freight growth as consumers cleared store shelves in preparation for quarantine. With many states reopening, warehouses and DCs that were sitting idle around production centers need replenishing to get back online. Long haul typically precedes short haul volumes during normal conditions.
Even though a large amount of truckload freight moving across the country is skipping a stop, the domestic intermodal container volumes are signaling recovery in replenishment. Domestic intermodal containers, traditionally 53 and 48 feet long, require transloading on and off the rail, and often the container itself requires an intermediate handling prior to final delivery. This freight typically does not have as fast a service requirement, meaning shippers feel they have time prior to the demand creating a shortage of inventory.
The combination of essential freight and replenishment orders returning to the marketplace has created a double-up wave of freight moving domestically in the U.S. This surging volume exceeds many expectations.
The concerning third line on the chart, however, is the international intermodal volumes moving on the rail (ORAILINTL). These are typically 20- and 40-foot containers that arrive via ocean containership and enter the country through the ports.
Earlier in May, Greg Miller reported many shippers were canceling orders out through July, leading to an unprecedented number of blanked sailings due to low volume. Earlier this week, however, he reported a reversal or “unblanked” sailings were now occurring as shippers are starting to see more demand than initially anticipated. It typically takes four to six weeks for those orders to appear in the U.S., but domestic orders with existing freight are more immediate.
The signals can be quite confusing, but they are the product of a confusing time. It is clear that no one has a clear view of how the economy will recover. Supply chains are obviously disrupted, but there are plenty of signs that the recovery may be stronger and faster than many thought.
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.
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