Market InsightMarket UpdateNews

Weekly Market Update 7.25.18


Freight markets have stopped their freefall after heating back up at the end of the 2nd quarter. Tender rejection rates are flattening after dropping consistently over the first two weeks of the 3rd quarter. Historically, freight activity declines in July as shippers and carriers alike take time off to recuperate after late spring volume surges and to enjoy the 4th of July. This year was no different in that regard, but 2018 has not been the most regular in terms of following traditional freight patterns.

As noted in previous weeks’ updates, shipping volumes have reached 10-year highs, and carriers have taken note of all the volatility incurred from government activity (ELDs) and mother nature (hurricanes and nor’easters), taking significant rate increases over the past 6 months.

Tender rejections, the rate at which a carrier declines electronic load submissions offered by a shipper, have proven to be a good indicator of near time freight market rate activity. Carriers will decline loads as capacity tightens or better rate opportunities exist. The national tender rejection rate has been declining since the end of June until the past week where markets like Los Angeles had a large increase in outbound tender rejections in response to surging port volumes. Outbound tender rejections from the LA market have since stabilized.

Isolated instances of increased rejection rates in markets like New Orleans and El Paso saw weekly increases in rejection rates surge 14% and 12% respectively. Both have since moderated. Like L.A., these markets are heavily influenced by international freight movements which appeared to be the theme of the week.  

 Image: SONAR Chicago OTRI vs national TRI showing a divergence between the two with Chicago increasing and USA decreasing. 
Image: SONAR Chicago OTRI vs national TRI showing a divergence between the two with Chicago increasing and USA decreasing. 

One major market that is not following the same pattern as the general market is Chicago. After hitting a summer low of 21.5% on July 17th, Chicago OTRI has increased to 23.85%. Participants in the freight market should watch this area closely as Chicago can have an impact on national capacity.

 Image: SONAR showing single and multi-family housing start levels in June. 
Image: SONAR showing single and multi-family housing start levels in June. 

On the macroeconomic front, housing starts took a dive in June, sequentially dropping 12.3% from May. Housing starts are a good measure of general economic well-being as high demand for new housing indicates the population feels good enough about their monetary situation to make the large purchase. Housing starts are also a good indicator for specific freight flows as it pertains to construction and Raw materials. The drop off was significant but still relatively high historically. A single month drop is not enough to indicate an economic slowdown. New home construction is has climbed 7.8% year-to-date.

We are at a pivotal point in the freight market. With some indication the markets are cooling, the national tender rejections still have not returned to annual lows that occurred in early May where the national TRI hit 19%. Currently they are hovering just above 20%. The next few weeks will be telling as port congestion piles up with international shippers pushing freight in front of potential tariffs and schools start back. Historically, shipping volumes encounter a second surge in August or September, but again, this year has been atypical.

Along with shipping volumes, weather has a big impact on freight in the 3rd quarter as hurricane season begins in earnest in August. Conditions over the mid-Atlantic tend to become more favorable for tropical development in late summer with warming water and trade wind patterns change. This year, however, the waters in the tropical Atlantic have been unseasonably cool and there is a lot of dry air from Saharan Africa positioned over the main development region of the tropical latitudes.

For a quick video update of this week’s freight market activity using FreightWaves SONAR platform click here. 

Stay up-to-date with the latest commentary and insights on FreightTech and the impact to the markets by subscribing.

Show More

Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also a 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.