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Weekly Market Update: Capacity abounds as volume flattens

( Photo: FreightWaves )

It’s the monsoon season for capacity. Tender rejection rates have hit new lows every day for the past week, settling in at 8.32% today. Volume continues to be relatively strong for this time of year as the national tender volume index (OTVI) hovering around 9,700, dropping only 1% in the past seven days. For context, the average tender volume index value for October was 9,650. To be fair, October came in softer than expected, but it is still interesting that January volumes to this point have been stronger.

As FreightWaves reported yesterday, there are many brokers quoted as saying this is an exceptionally soft market, even for this time of year when volume is historically lower. There are very few markets exhibiting any signs of large-scale disruption, which further adds to the market balance.

Only 28 of the 135 markets have higher levels of tender rejection versus last week. Of the 28 markets that had increasing rejection rates, the largest of them were in the Carolinas. The Charlotte and Greenville markets both represent over 1% of the total outbound market volume in the U.S. Charlotte is up 319 bps on its outbound tender rejection index (OTRI) while simultaneously seeing a 7% increase in volume over the past six days.

There continues to be significant activity on the West Coast as the region attempts to deal with all the excess freight that poured into the ports over the past six months. A lot of this volume appears to be moving intra-region from the coastal Los Angeles market into second tier warehousing markets of Stockton, CA and Phoenix, AZ. L.A.’s  OTVI value surged coming out of the holiday and continued to hit higher levels in the last week, climbing another 7%.

 L.A. outbound volume surges while Stockton inbound volume increases similarly as excess freight leaves the port region to find warehouse capacity (SONAR: OTVI.LAX, ITVI.SCK)
L.A. outbound volume surges while Stockton inbound volume increases similarly as excess freight leaves the port region to find warehouse capacity (SONAR: OTVI.LAX, ITVI.SCK)

The Stockton Inbound Tender Volume Index (ITVI) climbed 10% over the past seven days, indicating a significant increase of inbound freight. The interesting aspect of this repositioning is that shippers are desperate enough to move their freight into a traditional backhaul market where the cost of getting it out will be higher if it needs to move back towards Southern California when the freight is needed.

With Chinese New Year only a few weeks away–Feb 6–the West Coast will continue of interest as we watch for any secondary inflows coming from China that might have an impact on surface transportation. The Freight Baltic Index that measures the average rate to ship a 40-foot container from China to the North American West Coast, only increased marginally (1.3%) this past week, indicating there has not been a significant change in shipping volume in that lane. The rate from China to the North American East Coast increased similarly (1%).

Looking into the next week, historically one of the slowest times of year, we expect little change. The market is dramatically different than this time a year ago, just another example that nothing lasts forever.  

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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.
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