Weekly Market Update: So far, so February

Freight volumes have remained stable over the past week, slightly declining 0.7% over the past seven days. Volumes are still higher than late January where they hit the lowest levels of 2019, but seem to be slowly moving toward that point again as we hit mid-February. National capacity also remains relatively flat, as the national tender rejection index has dropped 22 bps over the past seven days. Currently, capacity appears to be very prevalent throughout most of the country.

The Midwest experienced some significant weather this week as a few winter storms dropped snow and ice across areas north of Chicago. This type of weather is not unusual, but it coincided with surging volumes out of the region. The outbound tender volume index for the Chicago market rose approximately 7.6% this past week and hit levels equivalent to the pre-Thanksgiving run-up period. Tender rejection rates (OTRI.CHI) had been averaging around 11.75% in the early parts of the month until dropping to 10.8% as carriers were more willing to enter the city after the storm cleared.

Elsewhere in the region the Milwaukee market has been seeing rejection rates climbing over the week as snow piles up, increasing over 150 bps since last Wednesday on higher volume as well. The nearby smaller Madison, WI market also had a big jump in volume, increasing over 30% over the past week.

The Pacific Northwest region has also been experiencing some disruptive weather, Seattle having had more snowfall than Boston so far this winter. Seattle is not as accustomed to dealing with snow in the metro area as the midwestern cities. The impact is less significant to freight flows, however, as volumes from the region have dropped significantly off the late 2018 peak levels. Tender rejections did increase slightly over the past few days out of Seattle in response.

Further down the coast in L.A., tender rejections increased 86 bps in a single day, the biggest single day increase since late November when rejections peaked prior to Thanksgiving. At the time, rejection rates were 14.67%, yesterday they were 2.96%. The market has changed dramatically in the past two months as expected coming into mid-winter. The increase is still notable, as outbound volumes have been exceeding inbound volumes for some time without any major capacity disruption. This is largely due to the shorter-haul nature of the loads as carriers are moving intra-regionally, as warehouses have been at capacity around the ports. Short haul rejection rates have been increasing since late January and were the main driver in yesterday’s upward push, jumping to 6.28% from 5.53%. The short haul rejection index for L.A. (STRI.LAX) has increased almost 300 bps since January 20th.

Looking forward, there appears to be no sign of any major disruption on the horizon for the freight market. Chinese New Year has not brought any massive inflow of containers. The Freightos Baltic Exchange Index for China to North America’s West Coast have fallen for the third week in a row.