The dry van market has been experiencing notable trends and shifts recently, with tender rejection rates and spot market rates showcasing interesting patterns. As we delve into the latest data, it’s clear that the market is navigating through seasonal changes and external influences, reflecting both historical parallels and current dynamics.
Elevated Dry Van Tender Rejection Rates
Despite the lack of a robust post-July Fourth rally, dry van outbound tender rejection rates remain significantly higher compared to last year. The national dry van outbound tender rejection index (VOTRI) dropped by 68 basis points (bps) over the past week, moving from 5.89% on July 8 to 5.21%. However, this figure represents a substantial year-over-year increase, up 230 bps from 2.91% on July 15, 2023. Similarly, nationwide outbound tender rejection rates followed this trend, falling 54 bps week-over-week from 5.65% to 5.11% but rising 204 bps year-over-year from 3.07% to 5.11%.
Spot Market Rates: A Mixed Bag
The dry van spot market rates have shown mixed movements. While there has been a slight week-over-week decline, rates are still performing better than the previous year. The National Truckload Index (NTI) dropped by 2 cents per mile from $2.37 on July 8 to $2.35. Despite this, the rates are up by 10 cents per mile compared to the same period in 2023, which saw rates at $2.25 per mile. This improvement highlights a relative strengthening in the spot market compared to last year.
Buffalo’s Surge in Tender Rejections
One of the standout regional trends is the significant increase in Buffalo’s outbound tender rejection rates. Over the past week, Buffalo’s rates surged by 336 bps, climbing from 3.79% on July 8 to 7.15%. This rise is primarily driven by dry van loads, which saw a 393 bps increase from 4.23% to 8.18%. Reefer tender rejection rates in Buffalo also experienced a modest increase, up 44 bps week-over-week from 3.24% to 3.68%.
Comparing 2019 and 2024 Markets
A fascinating aspect of the current market is its resemblance to the 2019 freight market. Both periods are characterized by loose market conditions, deflating rates, and an excess capacity following a prolonged period of tightness and inflated rates. In 2019, a significant growth in supply led to a market collapse from late 2018 through 2019. The 2024 market shares similar traits, but the scale of post-pandemic volatility adds a layer of complexity.
Capacity Dynamics and Future Projections
The national Outbound Tender Reject Index (OTRI) reached its highest level in nearly two years just before the Fourth of July, slightly above 6.5%. Although this is a relatively low figure from a historical perspective, it is much higher than the sub-4% value seen in 2023. This year-over-year increase suggests a tightening market, albeit at a slow linear pace. The risk of accelerated capacity exits and surging rejection rates is on the rise.
External Factors and Risks
Several external factors pose risks to the freight market. The bulk of hurricane season is ahead, and severe weather events can disrupt shipping networks. Additionally, economic policies, such as potential interest rate cuts by the Federal Reserve, could stimulate the economy, while higher rates might slow it down, potentially triggering a recession. These factors, largely outside anyone’s control, should be monitored closely.
Conclusion
As we move towards Labor Day and beyond, the freight market’s trajectory will be influenced by a mix of historical patterns, capacity dynamics, and external factors. The 2019 market provides a cautionary blueprint, but the unprecedented scale of post-pandemic volatility means that market participants should remain vigilant and adaptable. With tender rejection rates and spot market rates continuing to show nuanced movements, the coming months will be crucial in shaping the freight market’s outlook for the rest of 2024.
