Chart of the Week: Outbound Tender Volume Index, National Truckload Index linehaul only – USA SONAR: OTVI.USA, NTIL.USA
Outbound tender volumes (OTVI) surged over 7.1% from May 26 to June 3, marking one among the strongest demand surges to begin the summer shipping season since 2019. The spike in tender volume appears to have helped sustain spot rates excluding estimated fuel costs (NTIL) at relatively elevated levels beyond the Memorial Day holiday period.
The Outbound Tender Volume index measures the entire variety of electronic requests from shipper to carrier. It biases heavily toward the contract freight market, which consists of long-term rate agreements between larger carriers and bigger shippers. It also leans heavily on dry van and refrigerated freight.
The domestic truckload market has been in an extreme state of oversupply for the reason that first half of 2022, when the impacts of COVID on supply chains and demand began to wane. Transportation service providers have been experiencing an industry wide recession for concerning the same time period and are waiting for any sign that the market is popping.
Volumes are likely to jump this time of the 12 months, increasing between 0.3% and 6.8% over the past 4 years, but they jumped 8.8% in 2019, in a historically down market.
So while the tender volume jump was the most important in several years, it has not pushed rates higher proportionally — it has more sustained the extent. The explanation for this lack of rate jump is essentially that there remains to be enough capability to handle it.
The more positive news might be the spot rate figure, which has been averaging about 4%-7% higher 12 months over 12 months since early May. Until that time, rates had been largely lower than they were in 2023 through a lot of the winter and spring.
International Roadcheck and Memorial Day appeared to assist push rates higher, and that has sustained through the primary week of June. The recent two-month period of year-over-year spot rate growth has been the longest since early 2022.
Baby steps
The solid takeaway is that the market has shifted directionally, meaning things usually are not getting worse from a transportation service provider perspective. There remains to be an extended strategy to go before transportation corporations can breathe more easily, nevertheless.
Signs of a more balanced environment will manifest in the shape of tender rejection rates — the share of tenders where carriers turn down the request from shippers to maneuver their freight (OTRI) — being between about 5% and seven% during nonholiday periods. This tends to be the place where carriers have enough leverage to cost their services above cost thresholds and shippers can enjoy a more predictable long-term sourcing situation. Taking a look at rejection rates over the past six years, that appears to be a rare occurrence.
Rejection rates are still below 5%, even with the recent demand bump, but they’re trending higher. Considering this summer shipping pattern of increased demand tends to last for about a month and a half, service providers may get only a brief boost before the July lull hits, pending some type of exogenous event like a hurricane.
Comparing 2024 rejection rate patterns to 2019, the markets look eerily similar over the past few weeks, indicating that we can have finally entered the tailing fringe of the capability exodus. While these two markets usually are not the exact same, the 2019 OTRI pattern looks like an honest blueprint to make use of for what to anticipate for the remaining of the 12 months if economic conditions remain the identical.
Concerning the Chart of the Week
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