Chart of the Week: Outbound Tender Volume Index, Loaded Outbound Rail Container Volume Index, Inbound Ocean TEUs Index – USA SONAR: OTVI.USA, ORAILL.USA, IOTI.USA
Truckload tender volumes (OTVI) remain the weakest of the three major demand-side indicators in SONAR. In contrast, loaded intermodal containers moving by rail (ORAILL) are averaging more than a 7% year-over-year increase, and container import bookings (IOTI) are showing similar gains after clearing the Lunar New Year period.
The takeaway: The freight market remains in a holding pattern, while financial markets struggle to interpret what seems to be an ongoing trade policy standoff.
At the time of writing – a caveat now necessary in any discussion involving tariffs due to the pace of change – tariffs on Chinese goods have climbed to 125%, placing immense pressure on businesses that source products from China.
China remains the dominant origin for containerized goods entering the U.S. by sea. Many companies began diversifying their supply chains away from China following the COVID pandemic, which exposed the risks of overdependence on Chinese manufacturing. Some of this shift began during the Trump administration as trade tensions intensified.
This most recent wave of tariffs and negotiations has left many supply chain managers in limbo. Many had expected more time and clearer guidance to move production to countries like Mexico and Vietnam. Instead, a series of blanket tariffs – including early measures targeting North American trade partners – has left them uncertain about their next steps.
Meanwhile, truckload demand has dropped nearly 10% over the past year, as shippers increasingly turn to intermodal solutions for domestic transportation.
Intermodal demand is thriving (from a volume perspective, not pricing) largely due to increased lead times on orders. Shippers are “pulling forward” inventory well ahead of fulfillment needs, reducing the urgency that typically accompanies just-in-time inventory management models.
During the pandemic, transportation providers were overwhelmed with freight that needed to move immediately. Today, they’re seeing a glut of freight that might need to move in a few weeks – or longer.
While intermodal is typically a lower-cost option, it also benefits in this environment from its inherently slower pace, owing to multiple transloading points. Shippers are using this to their advantage, effectively treating intermodal as a form of “rolling storage” to manage inventory.
However, the escalation of tariffs with China suggests that this pull-forward strategy may soon come to an end – at least with that country. If that happens, import demand could fall back to levels more in line with actual consumption.
Despite a steep decline in both consumer and business sentiment, economic fundamentals have been slower to react. So far, there’s been little concrete evidence of a dramatic economic slowdown outside the stock market – which tends to be both forward-looking and emotionally reactive. The broader economy has yet to feel the full impact of these tariffs.
Assuming – hypothetically – that the current tariff structure is the final version (which is unlikely), import demand could drop by 6%-11%, holding consumption constant. That decline would represent the fading of inventory pull-forward effects.
In that scenario, truckload carriers might benefit from a return to more just-in-time inventory practices and a renewed sense of urgency around domestic freight. But that’s a big “if,” given the many moving pieces. Tariff-driven inflation would pose near-term challenges for both businesses and consumers as supply chains adjust, heightening the risk of a broader economic downturn.
For now, both the economy and the freight markets are being held hostage by uncertainty. Despite the flurry of headlines and anxiety, there’s been little meaningful change in the core data. Of the three modes discussed here, truckload demand faces the least short-term downside risk – little consolation for a sector that has been struggling for nearly three years.
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 FreightWaves.com for future reference.
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