Chart of the Week: Inbound Ocean TEUs Index – USA SONAR: VOTRI.URSE, VOTRI.URNE, VOTRI.URSW, VOTRI.URWT, VOTRI.URMW
Southeastern dry van regional rejection rates — the rate at which truckload carriers turn down loads from contracted shippers — have surged past all other regions this summer, hitting their highest level since July 2022. This breaks a trend of nearly two years of low volatility for the region.
The Southeastern region is the second-largest outbound region for freight in the U.S., behind the Midwest. It includes states east of the Mississippi and south of Indiana and Virginia. The largest outbound market is Atlanta. It is also where many carriers are based and many drivers live.
The significance of this region’s having the most elevated rejection rates is simply that it is breaking a multiyear pattern of relatively loose capacity conditions and minimal volatility.
Last summer the Southeast peaked at a 3.52% rejection rate for dry van loads heading into the July Fourth holiday. The more telling thing is that rejection rates moved between a band of 2.5% and 3.5% throughout the year.
This year, rejection rates have exceeded 3.5% since the start of March and have now topped 7.5% for the first time in 23 months.
Atlanta, the regional hub, has been the nation’s second-largest outbound market in 2024, accounting for roughly 3.4% of the total outbound tenders in SONAR’s tender data. Ontario, California, has the top spot at 3.6% since the start of the year. Dallas is third but rising at 3.3%.
Atlanta’s outbound rejection rate has doubled since last summer and has risen faster than both the Ontario and Dallas markets this year. Interestingly, increasing demand does not appear to be a driving force behind the deterioration in carrier compliance, at least on a market level.
Tender volumes are relatively flat in June compared to where they have been through most of the year, outside of a post-Memorial Day blip. The explanation may be in the substantial increase in the Ontario market demand level since early May. Ontario’s OTVI has risen 20% since May 1 and appears to still be growing.
While capacity remains abundant in the domestic freight market, the flow of freight is not balanced. Carriers are constantly having to rebalance their networks to account for demand shifts. Covering Southern California requires a significant amount of capacity due to the lack of inbound freight relative to the rest of the country. Loads originating from the Los Angeles area average the longest in the U.S. due to influence from the nation’s largest port complex.
Carriers tend to prioritize covering loads originating in Southern California because they are the most disruptive and provide the most revenue.
On the flipside, the Midwest may be a beneficiary of the West Coast regional freight demand boom. Many of the loads leaving Los Angeles end up in the Midwest and Northeast. Subsequently rejection rates are relatively subdued in both regions.
Spot rates from Atlanta to Harrisburg, Pennsylvania, are up 16% since early May, according to FreightWaves TRAC data, nearing the average contract rate. If spot rates exceed contract rates, rejection rates could spike, leading to significant deterioration in service, and force shippers once again to bid against one another for capacity.
There still appears to be plenty of capacity available in the market, just not in the right places. This regional shortfall of capacity may be temporary, as we are approaching the seasonal peak of summer shipping around the Fourth of July, but it is just one more example showing the domestic truckload market is becoming increasingly vulnerable to disruptions.
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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