Chart of the Week: Inbound Ocean TEUs Index – USA SONAR: VOTRI.URSE, VOTRI.URNE, VOTRI.URSW, VOTRI.URWT, VOTRI.URMW
Southeastern dry van regional rejection rates — the speed at which truckload carriers turn down loads from contracted shippers — have surged past all other regions this summer, hitting their highest level since July 2022. This breaks a trend of nearly two years of low volatility for the region.
The Southeastern region is the second-largest outbound region for freight within the U.S., behind the Midwest. It includes states east of the Mississippi and south of Indiana and Virginia. The most important outbound market is Atlanta. It’s also where many carriers are based and lots of drivers live.
The importance of this region’s having probably the most elevated rejection rates is just that it’s breaking a multiyear pattern of relatively loose capability conditions and minimal volatility.
Last summer the Southeast peaked at a 3.52% rejection rate for dry van loads heading into the July Fourth holiday. The more telling thing is that rejection rates moved between a band of two.5% and three.5% all year long.
This yr, rejection rates have exceeded 3.5% because the start of March and have now topped 7.5% for the primary time in 23 months.
Atlanta, the regional hub, has been the nation’s second-largest outbound market in 2024, accounting for roughly 3.4% of the overall outbound tenders in SONAR’s tender data. Ontario, California, has the highest spot at 3.6% because the start of the yr. Dallas is third but rising at 3.3%.
Atlanta’s outbound rejection rate has doubled since last summer and has risen faster than each the Ontario and Dallas markets this yr. Interestingly, increasing demand doesn’t seem like a driving force behind the deterioration in carrier compliance, not less than on a market level.
Tender volumes are relatively flat in June in comparison with where they’ve been through many of the yr, outside of a post-Memorial Day blip. The reason could also be within the substantial increase within the Ontario market demand level since early May. Ontario’s OTVI has risen 20% since May 1 and appears to still be growing.
While capability stays abundant within the domestic freight market, the flow of freight will not be balanced. Carriers are continually having to rebalance their networks to account for demand shifts. Covering Southern California requires a big amount of capability resulting from the shortage of inbound freight relative to the remainder of the country. Loads originating from the Los Angeles area average the longest within the U.S. resulting from influence from the nation’s largest port complex.
Carriers are likely to prioritize covering loads originating in Southern California because they’re probably the most disruptive and supply probably the most revenue.
On the flipside, the Midwest could also be a beneficiary of the West Coast regional freight demand boom. Lots of the loads leaving Los Angeles find yourself within the Midwest and Northeast. Subsequently rejection rates are relatively subdued in each regions.
Spot rates from Atlanta to Harrisburg, Pennsylvania, are up 16% since early May, in line with FreightWaves TRAC data, nearing the typical contract rate. If spot rates exceed contract rates, rejection rates could spike, resulting in significant deterioration in service, and force shippers once more to bid against each other for capability.
There still appears to be loads of capability available available in the market, just not in the precise places. This regional shortfall of capability could also be temporary, as we’re approaching the seasonal peak of summer shipping across the Fourth of July, however it is just another example showing the domestic truckload market is becoming increasingly vulnerable to disruptions.
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