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Reefer demand is thriving this winter

Photo: Jim Allen - FreightWaves

Chart of the Week: Reefer Outbound Tender Volume Index, Van Outbound Tender Volume Index – USA SONAR: ROTVI.USA, VOTVI.USA

According to FreightWaves Reefer Outbound Tender Volume Index (ROTVI), which measures contracted reefer freight volumes in Canada and the United States, reefer trailer demand is outperforming one-year ago by 13%, while their dry van counterparts are down a percent. According to the index, reefer — or more accurately called temperature-controlled — requested trailer volumes have exceeded previous year levels over the past two and a half months. What should we take away from this?

Reefer demand makes up roughly 12-20% of contracted freight market volume and is very seasonal. Reefer loads consist of more than just perishable goods like fruits and vegetables, but these are the types of items that create some of the biggest changes in market capacity. The infamous California “produce season” can drain capacity from all corners of the U.S. between April and June, which leads to increasing spot market activity and subsequently rates. Carriers will abandon contracted accounts to pursue more profitable freight moving across the country.

This is one of many reasons reefer capacity is a much more volatile commodity than the dry van counterpart. Some of the other factors are:

  • Lower supply of carriers
  • One directional freight, making it difficult to balance the network
  • Some freight requires specialization. i.e. cannot haul produce on hazmat trailers

On that last note, certain chemicals and products like paint and adhesives need to have consistent temperature or protection from freezing to maintain the quality of the product. These are the types of products that drive a lot of the winter demand for reefer trailers. Knowing this, it is a good sign for the coming months to see reefer demand increasing early in the year as these items have a connection to the industrial side of the economy, one of the weakest sectors over the past year.

The industrial sector is responsible for a lot of the health of the transportation sector. Manufacturing and capital goods production drove a lot of the economic recovery in 2017-18. Industrial growth has been negative since September. The good news is that this figure appears to be lagging in its representation of its impact on transportation, meaning the market may be recovering before we can measure it. Freight volumes were in steady decline in October of 2018 while industrial growth was showing robust 4% y/y increase.

Industrial growth continues its slide as the food and beverage side breaks out of a minor slump. (SONAR: IPROG.USA, IPROG.FBEVT)

There is evidence that the industrial side may not be driving growth in reefer demand, at least on the manufacturing side. There has been significant growth in food production in recent months. There is a large interest in the development of the e-grocery segment, leading to increased investment in food and beverage warehouses over the past year. It is hard to tell which commodities are driving the recent increase in demand, but either way, reefer carriers have reason to be optimistic in the coming months.

The same supply side constrictions that inhibit dry van growth are exaggerated for reefer carriers. Reefer trailers are 3-5 times more expensive than dry van trailers, making it harder for people to enter the space without significant investment. If demand increases further with limited supply, the sector will be exposed to increasing rate volatility — something that is already more prevalent in comparison to dry van movements.

Looking at the Reefer Outbound Tender Rejection Index (ROTRI), tender rejection rates, or the rate at which carriers reject their loads tendered by their customers and signal movements in spot rates, are already higher on average and subject to much more volatility than the van side. Last year, the ROTRI fluctuated from 23% in February to 8.6% in May and back above 24% in December.

Reefer and van rejection rates are both trending higher over the past six months. (SONAR: ROTRI.USA, VOTRI.USA)

The current trajectory of the ROTRI is different from the back half of 2018 in the way rejection rates have been trending higher since August. Increasing demand appears to be a contributing factor. The supply side limitations along with surging demand may make this spring more volatile for this segment than 2019.

Shippers who relaxed last year may be in for a rude awakening in the spring if produce shipments hit with any volume. The reefer carrier may be in a better position than van this year, even though there are many predicting a recovery for both.   

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real-time. Each week a Market Expert will post a chart, along with commentary live on the front-page. After that, the Chart of the Week will be archived on for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

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  1. Noble1= Shamash (Shemesh/Utu) the Babylonian God of the Sun(god of justice, morality, and truth-(enforcer of divine justice )

    Furthermore , who is to say that these so called “viruses” aren’t created in a lab somewhere in an attempt to create a biological weapon ?

    Speaking of which , check what I just found after writing the sentence above :

    January 25 2020
    “Virus-hit Wuhan has two laboratories linked to Chinese bio-warfare program”

    Apparently , I may not be too far off the mark !

    In my humble opinion …………….

  2. Noble1= Shamash (Shemesh/Utu) the Babylonian God of the Sun(god of justice, morality, and truth-(enforcer of divine justice )

    Quote :

    “According to the index, reefer — or more accurately called temperature-controlled — requested trailer volumes have exceeded previous year levels over the past two and a half months. What should we take away from this?”

    Ummm , that the coronavirus isn’t cutting Canadian & American appetites ? LOL !

    Speaking of which , these scientists have quite an imagination . Latin , Greek , Solar Corona during a Solar Eclipse & Royal Crown ,Halo .
    Why not sun spots while they’re at it ? LOL !

    Why haven’t we heard about the MERS-CoV infection that began in 2012 as much as this one ? The MERS-CoV infection was much worse than the SARS in 2003 . The SARS in 2003 infected 8000 people and 10% died in comparison to the MERS-CoV infection that infected 2,468 people and 851 people died(34.5%) up to 2019 , which is much more alarming than SARS and coronaV is currently ,

    Did people stop flying between 2012 & 2019 due to the MERS-CoV infection , as we are supposed to believe they did in 2003 based on SARS which supposedly had a negative effect on oil prices ?

    Mainstream media & Wall Street , the junction of BS galore .

    In my humble opinion …………

  3. I seen

    Foreigners from Africa and the Middle East that drive as their own trucking company in the US in a used truck and trailer while on a work visa. I SEEN SAY YOUR STEALING MY FREIGHT .like all freight belongs to them. SHOULD WE KILL HIM HE’S WHITE. Let’s shoot into the back of his sleeper when he’s sleeping. IM INTERNATIONAL I CAN KILL ANY AMERICAN I WANT . I’m going to sue your government then go back to Zimbabwe and live like a king

    1. Noble1= Shamash (Shemesh/Utu) the Babylonian God of the Sun(god of justice, morality, and truth-(enforcer of divine justice )

      You’ve seen ? Or you heard ? Were you part of the conversation ? Was it directed at you ? Or are you making this up ?

      There’s a much easier way to obtain more freight and more money than to jeopardize one’s liberty for a few bucks . Had you mentioned this , perhaps they would have clammed up after they asked you how .

      Did you not realize that they were unwise ?

      Threats and violence are mediocre compared to wisdom . Rather than taking what they said in the literal sense , you should have understood the message beneath what they were saying . GREED ! They were simply saying they want more loads and more money . That’s what you should have responded to , not take offense at their indirect hocus pocus way of expressing that desire .

      In my humble opinion ……………

    2. Davey

      They are not on work visas. There’s no such work visa that grant to drive trucks in u.s. most of the Africans have came under the U.N refugees program. And Asians have game illegally applied the asylum few months later got the cdls. Irony is most the asylum applicants haven’t even driven car on American highways and yet fmcsa gave them cdls. American immigration system is weak so many loopholes. Trump must end this refugee and fake asylum seekers program. Fmcsa shouldn’t give cdls to those foreigners who can’t even write speak read fluent English. Again system is broken i voted for trump hoping to get it fixed. He hasn’t fulfilled my hope yet. And yes i myself legal immigrant US law abiding citizens tax payer citizen. Who love this country from bottom core of my heart. And worry about people taking it for granted.

      1. Art

        Border wall aint going help with visa overstayers.

        Government allows employment loopholes to continue causing wage deflation.

        Its not just about Mexicans willibg to work for peanuts.

Comments are closed.

Zach Strickland, FW Market Expert & Market Analyst

Zach Strickland, the “Sultan of SONAR,” curates the weekly market update. Zach is also 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.