Panic-buying is continuing to create an unprecedented surge in domestic freight volumes. The outbound tender volume index is now at 12,483.78, which is over 8% higher than last week. This is by far the highest point in the three-year history of OTVI. Not only are volumes spiking higher, but they are spiking higher at a faster rate. In the past three weeks we have seen volumes increase 6%, then 7% and now 8% this week. Year-over-year comparisons are almost becoming meaningless – OTVI is up 24% since this time last year.
This demand spike is almost solely from panic-buying and restocking of shelves. Outbound volumes are above the 2018 peak (one of the best years in recent freight history) by nearly 10%. Shippers, especially those moving consumer packaged goods (CPG) are at the mercy of their carriers. At this time, shippers feel they cannot move freight fast enough, and for many of them the high spot rate markets are the only option. As more restaurants and businesses close, OTVI will flatten and begin returning to normal levels in the coming weeks.
Twelve of the 15 markets FreightWaves tracks were positive on a week-over-week basis. Markets with the largest gains in OTVI.USA were Indianapolis (22.2%), Atlanta (16.8%) and Fresno, California (15.8%). On the downside, this week saw a decline in Los Angeles (-11.7%), Seattle (-2.1%) and Chicago (-1.3%).
Tender rejections rise sharply this week
Outbound tender rejections have risen strikingly over the past week. OTRI currently sits at 15.06%, which is just above Christmas Day highs of 14.25%. A value this high is indicative of two things – drivers are rejecting contract loads in favor of higher spot market rates, and some drivers have left the market altogether (for now).
Last week OTRI was just over 8% and we believed then carriers were in a strong pricing power position. That number has nearly doubled and is likely to go higher as the virus persists over the coming weeks.
Time will tell whether the coronavirus impacts capacity disproportionately. Poor health, diet and lifestyles of drivers are well-known in the U.S. It is possible that drivers will be disproportionately affected by the virus. COVID-19 has the potential to wipe out a sizable portion of trucking capacity before it is contained.
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