Freight Market Update - August 15, 2018 - Volumes steady while capacity stabilizes

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The U.S. freight market continues to stabilize with a few points of interest in the Midwest and West Coast. The outbound tender rejection index for the U.S. dropped over 100bps this past week while volumes remained relatively flat. The newly implemented tender volume index -- an index that measures accepted load volumes in the U.S. (OTVI.USA) -- moved only marginally to settle at 10,031, which means that accepted load volumes in the U.S. are .31% higher than March 1st of this year.

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IMAGE: SONAR OUTBOUND TENDER VOLUME INDEX (OTVI.USA) PEAKING IN JUNE AND FLATTENING OVER THE LAST WEEK.

To put the number in perspective OTVI.USA had a peak value of 11,071 on June 22nd this year, which means load volumes were 10.71% higher than on the base index date of March 1st. The index hit a non-holiday low point on April 4th with a value of 9,488, meaning there were 5.12% less loads accepted on that day than on March 1st.

Tender rejections have continued to fall as the OTRI.USA has dropped from 18.15% to 17.5% as of August 15th. The declining OTRI is interesting considering load volumes have not increased or decreased much over the past week. The weekly change in outbound tender volume -- the change in percent of OTVI from 7 days prior (OTVIW.USA) -- has been 0% since August 8th, indicating no new national surges in total load volume have taken place over the past 7 days.

This does not mean there have not been isolated instances of capacity tightness or volume increases at a market level. In fact, there have. FreightWaves writer John Paul Hampstead uncovered a surge of intermodal activity in Chicago, and also a spike in a need for reefers in the St. Louis area in the past week.

As we have discussed in the previous several weeks, there are few signs of economic slowdown outside of some disappointing housing starts and building permits in June -- both down sequentially from May. In contrast to that was industrial production, an economic indicator that measures real output for facilities located in the U.S., has edged up in June and July. The Wednesday release of the July information states industrial production rose 0.1% in July and also revised the June number up to 1%.

Along with all the positive signs from the economy stateside, the Freightos Baltic Exchange continues to see upward pressure on spot container rates from China to the North American West and East Coasts. Some of the reasons for the higher rates are carrier increases and self-imposed capacity constriction as the fallout from tariffs becomes apparent, but volume certainly has an impact.

Most data points to a strong state of the market in early August. It just has not translated to increased spot market activity or rates yet. Historically speaking, August should see that change, but it doesn’t mean it will. Keep in mind, spot van rates have increased almost 20% year-over-year on average, so carriers are going to be a little less willing than in previous years to abandon their contracts. That is, until the next big capacity crunch.

Check out this week's market update video for a quick roundup. 

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