Chart of the Week: Outbound Tender Market Share – Laredo, Phoenix, McAllen, Ontario SONAR: OTMS.LRD, OTMS.PHX, OTMS.MFE, OTMS.ONT
Truckload demand has nearly doubled out of the border town Texas markets of Laredo and McAllen since 2018. Phoenix has experienced an identical developmental boom, becoming a proxy for California’s old warehousing capital in Southern California’s Inland Empire. This shifting demand pattern is changing transportation networks and can subsequently impact future pricing structures.
Transportation demand patterns proceed to point out signs of shifting east, at the same time as tender volumes have been increasing once more out of Southern California. The Ontario, California, market, which houses a big portion of warehousing and distribution centers for among the nation’s largest corporations, has lost market share to other areas regarding outbound freight demand.
The Outbound Tender Market Share indexes measure the share of outbound tenders relative to all the other 135 markets within the U.S. The Ontario market accounted for roughly 4% of all freight tenders in July 2018 but has been averaging around 3.75% over the past month.
The trend is more vital than the present value in this case. Ontario’s market share value hit all-time lows this past winter, falling below 3% for the primary time within the indexes’ history.
Aggregate demand has dropped across the country since early 2022, with California’s share of that demand falling faster than many other origins, especially Phoenix and among the Texas markets.
Supply chain diversification strategies help explain this pattern shift as corporations try to maneuver away from single sourcing practices. This practice does hedge corporations against wild swings arising from geopolitical risks, but it surely can also increase costs.
As corporations are shifting their sourcing and logistics networks, it’s changing the way in which transportation providers can have to administer their very own businesses. Carriers need consistency and balance to maintain their costs low.
As demand patterns change, there may be an upward pressure placed on rates as carriers determine how reliable the patterns are and put their networks back into balance. This takes months to realize if not longer, especially in the event that they are usually not aware of the environmental shift.
The above map shows which markets have the most important imbalances within the U.S. when it comes to freight flows based on FreightWaves’ Headhaul Index. Red markets are heavy on inbound volumes, while blue markets are heavy on outbound shipments. White means it’s currently more balanced.
Blue markets are inclined to carry higher prices as a consequence of demand exceeding supply naturally. Red markets house a few of the most affordable outbound rates within the U.S.
That is what the map looked like in the midst of August 2019. Notice the markets bordering Mexico were way more inbound-centric, meaning well supplied with capability. Notice increasing polarization within the Northeast markets as that region has also shifted due to more regionalized distribution while the darkest reds appear to have muted in lots of areas.
The present market continues to be extremely well supplied in aggregate with tender rejection rates below 4% (a figure indicative of carriers not having enough freight to maneuver). These shifting patterns are usually not very obvious to transportation providers in a soft market. Once the tide of excess capability retreats, because it is predicted to do over the subsequent 12 months, these areas might be more exposed to higher outbound transportation costs than they were prior to the pandemic.
In regards to the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that gives an interesting data point to explain the state of the freight markets. A chart is chosen from hundreds of potential charts on SONAR to assist participants visualize the freight market in real time. Each week a Market Expert will post a chart, together with commentary, survive the front page. After that, the Chart of the Week might be archived on FreightWaves.com for future reference.
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