Chart of the Week: Carrier Details Total Trucking Authorities, Outbound Tender Volume Index Monthly – USA SONAR: CDTTA.USA, OTVIMTH.USA
Monthly truckload tender volumes for September were 16% higher than September of 2018. The variety of carrier operating authorities reported by Carrier Details using FMCSA data has risen 49% over the identical period.
The extraordinary excess of capability is what’s driving the present freight market conditions and because the chart suggests, capability changes are very slow in relation to demand. Transportation service providers are forced right into a waiting game of survival until it ends. While it might not look like it, the tide is already turning.
Strangely, the pandemic was not directly chargeable for overstimulating the worldwide economy. Government stimulus packages and increased time at home created the proper storm of consumption of products while travel and leisure services faltered.
In 2022, this trend reversed with violent force, a consummate example of an economic bubble manifesting in durable goods purchases. Not all have felt the shift equally, but the combination U.S. economy has definitely cooled since then.
None have felt that cooling greater than transportation service providers, which have been coping with difficult conditions since early 2022, when demand eroded rapidly. A number of the volume has recovered, but not nearly enough to support the prevailing capability.
The newest example of the tough market conditions occurred last week as Convoy announced it was shutting down its brokerage division because of “an enormous freight recession and a contraction in capital markets.”
FreightWaves CEO and founder Craig Fuller wrote an article earlier within the week about how brokerages were prolonging the capability glut on this freight market downturn because of increasing presence in shipper routing guides and talent to attach smaller carriers to larger shippers.
As a byproduct of their rapid expansion and utility, they at the moment are nearly as exposed to exiting the market because the asset-based fleets.
An excessive amount of of an excellent thing
There was a variety of speculation about how long this downcycle will persist. I wrote a bit at the top of February of this 12 months stating that there was a minimum of 25% an excessive amount of capability based on my evaluation of tender data.
Over time, the style of evaluation I used becomes difficult to reapply because of a scarcity of visibility around supply-side dynamics. The above chart suggests which will have been an understatement.
Fuller wrote in his article mentioned above that the market has a few 12 months and a half before capability is more in alignment with demand, but he admits that is subject to economic changes and accelerations in carrier exits — the latter being very likely over the winter.
Carrier Details net changes in trucking authorities, which relies on FMCSA data, we’ve already seen a record rate of monthly exits that began in late 2022. The speed of exits has not come near the speed of latest authorities granted in 2021. Notice the speed of growth/exits hit low points near the turn of the 12 months, a very important trend to observe.
While operating authorities will not be a pure measure of capability addition or subtraction, they’re excellent at explaining directionally where capability is heading and at what rate. The issue with most estimations at this point is that they assume demand and provide side consistency and project it forward in a comparatively linear manner.
Not a straight line
We will not be in a stable pattern because the economy continues to point out puzzling signs and the speed of carrier exits will most assuredly increase because the downturn persists.
The nice and bad of all that is that it should not last. The market is already moving back toward equilibrium, though that is difficult to see. Spot and contract rates have traditionally been the way to measure market conditions but have develop into convoluted with rapid cost inflation and sentimentality.
Tender rejection rates are far less noisy and doubtless paint the cleanest picture of the freight economy. rejection rates for dry van (white), refrigerated (blue) and flatbed (green) loads, the van market continues to be in a deep deflationary environment.
Flatbed has had a novel experience after supply chains unkinked in 2022 but has slowly moderated this 12 months.
Refrigerated instability
Perhaps essentially the most interesting is the refrigerated sector’s recent pop that occurred in August. While there may be some seasonality involved here, it’s price noting that seasonal aspects haven’t been as pronounced because the recent period.
The refrigerated sector may very well be the canary within the coal mine on the remaining of trucking because it is showing increasing sensitivity to market conditions. Refrigerated rejections have been in close alignment with van over the past 12 months, an anomalous occurrence, but at the moment are showing increasing separation.
This too shall pass
This certainly not says the market is about to shift dramatically, however it does tell us that capability is eroding noticeably. On the bare minimum, it suggests a tighter peak season than 2022, but more importantly it insinuates that there’s a probability that the market turns in 2024.
There isn’t any definitive end to this market, however it is coming and it might occur faster than many expect. The present data seems to suggest that the market is not going to turn until 2025, but an acceleration in exits is inevitable. Gaps will open in route guides as providers drop before the correction is fully recognized.
This bust market is as unsustainable because the pandemic boom.
In regards to the Chart of the Week
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