As we navigate through August, the refrigerated truckload market, often referred to as the “reefer” market, is experiencing a notable surge in spot rates. This upward trend, which began in May, has outpaced the dry van sector, underscoring the seasonal and volatile nature of the reefer market. SONAR Tickers RTI.USA and NTI.USA reflect this rise, highlighting the recovery in spot and tender rejection rates since their spring lows.
The reefer market’s volatility stems from its dependence on seasonal factors, unlike the more stable dry van market. Despite not reaching January’s peak, when frigid temperatures across the central U.S. spiked demand for protect-from-freeze services, the current increase in rates appears more sustained and not tied to a single event. The West Coast, Southwest, and Midwest are the most impacted regions, though pinpointing a specific cause remains challenging. Overlaps with the dry van market, particularly in Southern California, and the peak produce shipping season in central California during May and June, may be contributing factors.
As we approach the seasonally disruptive period of late August, the reefer sector remains one to watch closely. Historical trends show that reefer tender rejection rates (ROTRI) often rise leading up to Labor Day, a trend we’ve observed four out of the past five years. Currently, ROTRI stands at 8.23%, a significant increase from 4.25% a year ago. Similarly, reefer spot market rates have risen to $2.68, up from $2.55 last year.
Florida Flatbed Market Reacts to Hurricane Debby
The flatbed market in Florida is experiencing above-average spot rate increases, particularly in the Panhandle, due to Hurricane Debby’s landfall. On average, 40% of flatbed lanes outbound from Florida report these increases. Nationally, flatbed tender rejection rates (FOTRI.USA) have surged 67% since July 23, while tender lead times (FOTLT.USA) have decreased by 5.9%, indicating a tighter market.
Despite these fluctuations, overall conditions in the truckload space are better than last year, though still affected by the summer lull. Nationwide outbound tender rejection rates have stabilized but remain elevated compared to last year, with OTRI at 4.58%, up from 3.30% a year ago. This aligns with 2019 levels, which were 3.85%.
Regional Market Movements: Jacksonville and Ontario
Jacksonville, Florida, has seen a softening in the market as both the Outbound Tender Reject Index (OTRI.JAX) and the Outbound Tender Volume Index (OTVI.JAX) dropped. OTRI fell by 209 basis points to 6.76%, while OTVI decreased by 9.35%. As a medium-sized market, these changes may not significantly impact spot rates but indicate a general loosening in market conditions.
In contrast, Ontario, California, has experienced an increase in tender rejection rates, which rose by 23 basis points to 6.22%. Despite these rejections maintaining levels above 6% throughout July, spot rates in Ontario have generally moved lower, with 13% of outbound lanes showing greater-than-average rate declines. However, volumes have gained momentum, rising 1.26% over the past week and hovering near year-to-date highs.
Promising Signs in Freight Market
A recent report from U.S. Bank’s Freight Payment Index Q2 data offers a glimmer of hope for the freight market. Three of the five regions, including the Northeast, Southeast, and West, posted sequential shipment gains compared to Q1. This is the first time since Q2 2022 that multiple regions have reported increases, suggesting the market may be nearing its bottom.
As we move through August, keeping a close eye on these market dynamics will be crucial. The reefer market’s seasonal volatility, the flatbed market’s reaction to weather events, and regional fluctuations all play pivotal roles in shaping the overall freight landscape. Stay tuned for next week’s update as we continue to monitor these developments.
