Chart of the Week: Outbound Tender Market Share – Laredo, Phoenix, McAllen, Ontario SONAR: OTMS.LRD, OTMS.PHX, OTMS.MFE, OTMS.ONT
Truckload demand has nearly doubled out of the border town Texas markets of Laredo and McAllen since 2018. Phoenix has experienced a similar developmental boom, becoming a proxy for California’s old warehousing capital in Southern California’s Inland Empire. This shifting demand pattern is changing transportation networks and will subsequently impact future pricing structures.
Transportation demand patterns continue to show signs of shifting east, even as tender volumes have been increasing once again out of Southern California. The Ontario, California, market, which houses a large portion of warehousing and distribution centers for some of the nation’s largest companies, has lost market share to other areas regarding outbound freight demand.
The Outbound Tender Market Share indexes measure the percentage of outbound tenders relative to all of the other 135 markets in the U.S. The Ontario market accounted for roughly 4% of all freight tenders in July 2018 but has been averaging around 3.75% over the past month.
The trend is more important than the current value in this situation. Ontario’s market share value hit all-time lows this past winter, falling below 3% for the first time in the indexes’ history.
Aggregate demand has dropped across the country since early 2022, with California’s share of that demand falling faster than many other origins, especially Phoenix and some of the Texas markets.
Supply chain diversification strategies help explain this pattern shift as companies try to move away from single sourcing practices. This practice does hedge companies against wild swings arising from geopolitical risks, but it also can increase costs.
As companies are shifting their sourcing and logistics networks, it is changing the way transportation providers will have to manage their own businesses. Carriers need consistency and balance to keep their costs low.
As demand patterns change, there is an upward pressure placed on rates as carriers determine how reliable the patterns are and put their networks back into balance. This takes months to achieve if not longer, especially if they are not aware of the environmental shift.
The above map shows which markets have the largest imbalances in the U.S. in terms of freight flows based on FreightWaves’ Headhaul Index. Red markets are heavy on inbound volumes, while blue markets are heavy on outbound shipments. White means it is currently more balanced.
Blue markets tend to carry higher prices due to demand exceeding supply naturally. Red markets house some of the cheapest outbound rates in the U.S.
This is what the map looked like in the middle of August 2019. Notice the markets bordering Mexico were much more inbound-centric, meaning well supplied with capacity. Notice increasing polarization in the Northeast markets as that region has also shifted thanks to more regionalized distribution while the darkest reds seem to have muted in many areas.
The current market continues to be extremely well supplied in aggregate with tender rejection rates below 4% (a figure indicative of carriers not having enough freight to move). These shifting patterns are not very obvious to transportation providers in a soft market. Once the tide of excess capacity retreats, as it is expected to do over the next year, these areas will be more exposed to higher outbound transportation costs than they were prior to the pandemic.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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