Yesterday, the national Outbound Tender Volume Index (OTVI.USA) broke the 10,000 barrier for the first time since December 3, as the West Coast markets in Los Angeles and San Francisco surged to close what is normally a soft February. National volumes have increased 4.7% over the past three days with the TVI suggesting national volumes are 0.25% higher than March 1st of last year.
The national tender volume index starts on March 1, 2018, with a base value of 10,000 – the value for February 27th is 10,025. Breaking through this barrier a day early in a year that many consider to be significantly softer than the previous one is interesting to say the least. Volume does not tell the entire story, however.
Digging a little deeper into the numbers reveals that 2018 was much different than the current year. Even though overall volumes are similar, market conditions are very disparate. National tender rejections continue to find new lows – as of Thursday rejection rates were 7.25%. This time last year this value was 24.08%.
The reasons for the disparity are numerous and most have been covered in terms of what the conditions were in 2018. The market had experienced significant destabilization in late 2017 that carried into 2018 with the two major hurricanes and a more robust than anticipated holiday retail season. Carriers were getting 20-30% higher rates on the spot market than for some of their contracted freight, so the optionality was far greater in early 2018, which lead to the unusually high tender rejections.
The story of late 2018 was much different than the second half of 2017, as it hinged on the West Coast activity amid the massive amount of inbound container volume coming from China as international shippers attempted to get in front of tariff increases. Outbound volumes averaged 15% higher out of L.A. than second quarter volumes when most of the U.S. peaked.
As warehouses filled, much of that freight had to move inland where more capacity for storage was available. That activity has continued with more of a regional focus in early 2019 as inbound volumes are surging in the Phoenix, Stockton, and Ontario markets.
The national freight market has been sleepy over the past several weeks with many larger market outbound volumes sliding under year over year comps on volume. The nation’s second largest market, Atlanta, is down 5.64% versus this time last year. Chicago volumes are off 11.99% on a year-over-year basis. L.A. volumes are up 90%, meaning the southern California markets are the biggest reason for the year over year increase. With all of the volume originating in the same spot over the course of several months, carriers have positioned their fleets in the area keeping the supply of trucks consistent.
It should be noted there has been increasing volumes out of many of the major markets over the past week. Chicago, Philadelphia, and Dallas are all showing 6-7% increases in volume over last week. With 87 of the 135 markets reporting an increase in volume over the past day, there is a general upward movement nationally speaking, but the overall value is being heavily supported by West Coast activity, the polar opposite of 2018.