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Weekly Market Update – Volumes fall as market flattens

National tender rejection rates remain flat this week as freight markets continue to show little signs of destabilization. The OTRI weekly change has had a positive value for the past seven days, implying the market may have at least hit a bottom in terms of carrier sentiment. The weekly change measures the absolute percentage difference in tender rejection rates. For example, the value of OTRIW.USA on August 20th was .47%. The OTRI.USA was 17.31% and on August 20th it was 17.78%.  The last time there were seven consecutive days of positive values was the last week of June.

 Image: SONAR showing the first 7 day consecutive positive change in tender rejection rates in the U.S.
Image: SONAR showing the first 7 day consecutive positive change in tender rejection rates in the U.S.

Contrary to this is the accepted load volume index which measures the number of accepted loads in the country. The outbound tender volume index (OTVI) shows a value of 9875.94 on August 21st, indicating that load volumes are 1.25% lower than March 1st of this year. The fact these two numbers are moving in different directions means that increased volume is not the reason for the market leveling out on tender rejections.

DAT is reporting declining national spot market van rates decreasing about $.02/mile versus last week, moderating off a $0.06/mile decrease in the week prior. The rates are still higher than reported in May but have been slowly retreating off early summer highs.

Volume by itself is not the only reason the freight market destabilizes. Volume surges in areas that have low truck supply are the main reason we see spot market rates increase. A look at outbound tender market share (OTMS) gives us a better idea of where trucks are moving. OTMS measures the volume of accepted loads in relation to the national market and increases or decreases in value help paint the picture of where trucks are going.

An example of a market with potential truck supply deficiencies is Indianapolis. The Indianapolis market is increasing accepted load market share at a higher rate than a majority of the country. Los Angeles and Augusta, ME are the only two experiencing larger increases in tender market share over the last seven days. The OTMS.IND value is 2.41%. This means outbound accepted load volume from the Indianapolis market represents 2.41% of all accepted loads in the U.S. A week ago, it was 2.26%, a 0.15% increase.

Increasing OTMS value indicates trucks are covering more loads in that area of the country. If load volumes stay the same, eventually there will not be enough trucks available to cover market demand. Looking at inbound volumes will help illustrate where potential supply and demand discrepancies will show up. Inbound tender market share (ITMS) when compared to OTMS gives insight into where potential truck and freight imbalances exist.

 IMAGE: SONAR illustrating the OTMS vs ITMS spread
IMAGE: SONAR illustrating the OTMS vs ITMS spread

ITMS in the Indianapolis market has been flat over the past week. With a current value of 1.95%, there is a large gap between OTMS.IND and ITMS.IND. The large spread between the values indicates the market has more freight moving out of the area than in. Carriers and brokers should be aware of the increasing spread between the two values. Outbound tender rejections have been on the rise out of Indianapolis over the past two weeks, increasing from 18.23% on August 8th to 25.79% on August 22nd.

With volumes sliding the market will be less reactive to capacity deficiencies as carriers will deadhead more and utilize other modes to move  their freight. Spot market activity will probably stay suppressed until an event forces the issue.

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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 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.