As the Fourth of July holiday approaches, the freight market is experiencing significant disruptions. Outbound tender rejection rates, a critical indicator of carrier availability, have surged across most mileage bands, impacting the logistics landscape.
Key Insights:
Tender Rejection Rates by Mileage Band:
- Midhaul Loads (251-450 miles): 8.38%
- Tweener Loads (451-800 miles): 8.53%
- Longhaul Loads (Over 800 miles): 6.89%
- Shorthaul Loads (100-250 miles): 6.18%
- Local Loads (Under 100 miles): Relatively stable
The overall outbound tender rejection rate stands at 6.54%. This rapid increase highlights the varying impact across different haul lengths. The Outbound Tender Reject Index (OTRI) includes five specific tickers for each mileage band:
- LOTRI: Longhaul loads
- TOTRI: Tweener loads
- MOTRI: Midhaul loads
- SOTRI: Shorthaul loads
- COTRI: Local loads
The variance in tender rejection rates is expected as drivers position themselves to get home for the holiday. This repositioning impacts dry van spot market rates, with the NTI rising 6 cents per mile week over week, from $2.32 to $2.38. Expect continued disruptions as capacity exits and reenters the market post-holiday.
Data of the Day: Rejection Rates Top 6% for the First Time Since 2022
For the first time since 2022, the national Outbound Tender Reject Index (OTRI) has surpassed the 6% threshold, just ahead of the Fourth of July. Sustained values below 5%-6% tend to deflate contract rates, which has been the case since August 2022. This increase indicates a shift in the market, suggesting a potential rebound.
Last year, the OTRI barely reached 4% around the holiday period, showing minimal disruption. The current 6.35% rejection rate, although still historically low, indicates early signs of market tightening. This year’s summer OTRI pattern resembles the 2019 market, which saw a significant increase in rejection rates by year-end. Signs of acceleration in carrier exits suggest that the second half of 2024 could be more volatile for transportation procurement.
Ocean Shipping Rates on the Rise
Spot rates for shipping forty-foot equivalent containers from China to North America have hit their highest levels since summer 2022, continuing to climb. This disruption in the maritime industry, while not as severe as during the pandemic, is leading to increased lead times and higher rates. As peak season approaches, inventory levels are low compared to 2019, indicating a strong potential for volume increases and possibly marking the end of the freight recession.
Regional Tender Rejection Rate Changes
The Outbound Tender Reject Index’s Weekly Change map shows significant week-over-week changes across major U.S. freight markets:
- West North Central States: Increased rejection rates, with notable rises in South Dakota (Rapid City: +6.36%), North Dakota (Fargo: +3.46%), and Nebraska (North Platte: +2.54%).
- Mexican Border: Mixed changes, with decreases in Texas (Laredo, McAllen, San Antonio) and increases in Arizona (Tucson), Texas (El Paso), and California (San Diego).
Dry Van Spot Market Trends
The dry van spot market rate saw a small increase, performing better than last year. The NTI rose 1 cent per mile from $2.31 to $2.32, a 7-cent improvement year over year. The NTI 28-Day outlook suggests minimal impact from the Fourth of July holiday, with spot market rates expected to remain stable.
Positive Developments:
- Dry Van Tender Rejection Rates: VOTRI rose to 6.19%, the highest since January 31.
- Ontario, California: Outbound tender volumes increased by 12.67% week over week, with a corresponding 80 basis point rise in outbound tender rejections, now at 7.8%.
Conclusion
The freight market is experiencing significant changes ahead of the Fourth of July, with rising tender rejection rates and market disruptions. This period of volatility presents challenges and opportunities for logistics and transportation stakeholders. Monitoring these trends will be crucial in navigating the evolving landscape.
Stay tuned for more updates and insights as we continue to track these critical market developments.
