Drivers returned to the road ready to work in the week after Thanksgiving. Volume remained high before and after the break as outbound tender volumes broke through 10,000 for the past 4 days, but tender rejections dropped back below 13%–the lowest point since early November. The falling tender rejections indicate there is plenty of capacity for the elevated volume.
Prior to the holiday, rejection rates and volume increased in tandem as driver availability was an issue. With home time behind them carriers appear to be handling the elevated volumes for the time being. Los Angeles has been the market of focus in November, with volume surging off heavy inflow from international shippers. That volume is dropping as the Ontario market is no longer the largest single outbound market in the U.S. as of last week.
The Freightos Baltic Index that measures the average cost of a 40-foot container from China to the North American West Coast has dropped roughly 15% since November 11th, decreasing every week. The somewhat baffling figure is indicative of maritime carriers attempting to squeeze every bit of volume out of this hotter than average international shipping market. Reports of void sailing and capacity reductions lend credence to the idea that the cycle may be coming to an end with declining volumes.
The trade war truce—if it holds—will aid in declining inbound volume as shippers no longer have to rush to beat the January first deadline and give them time to clear some of the warehouse inventory that has been building for the past several months.
This means that the Los Angeles markets should have less outbound volume over the next month or so followed by a potential secondary push preceding the Chinese New Year. The full impact of the containers that have landed has yet to be realized as it will take time for inventory to be dispersed. The fact that this will not be time-sensitive freight lets shippers move as needed, unlike holiday inventory freight with tight service requirements.
With L.A. softening, volume has moved inland. Chicago and parts of the Midwest have assumed pole position along with the Pacific Northwest. Chicago, like most of the country, has had little trouble taking on increased volume, but parts of the Northwest have not had as much luck. Tender rejections out of Chicago remained elevated for the week after Thanksgiving, but have dropped 128 bps over the past two days. Inbound Seattle tender rejections have jumped to the highest levels of the year—over 28%—as there are no regional carriers available, having moved further south along the I-5 corridor to cover the California freight.
The Southeast remains relatively flat on volume and capacity. Atlanta is back to being the largest single outbound market in the country over Ontario, not because of surging volume but L.A. volume dropping rapidly. After shooting over 10% for the first time since early October Atlanta tender rejection rates fell back to under 8% this week.