Demand capacity in balance?

(Photo credit: Shutterstock)

( Photo: Shutterstock )

The smartest minds on Wall Street use charting analytics to quickly identify and then track trends in multiple data sets. Why? Because it works. Even the most intelligent investor or skilled trader identifies patterns in numbers when they are charted far faster than when those numbers are simply displayed in columns and rows. Graphically depicting data becomes more important when you are trying to compare two or more data sets and understand the relationship between them over time. When viewing a chart of a couple of data sets that are related, you begin to understand the reason of the marketplace. If you can add a series of technical indicators to the graph, you begin to understand the rhyme and the reason of the marketplace. 

SONAR allows you to quickly view graphical series of data, many of which weren’t previously available to professionals trading the marketplace. More importantly, it allows you to view those data series compared to other data series (some proprietary, others not) and then apply the type of sophisticated technical indicators to the data series that are normally reserved for Wall Street. Patterns in the data don’t just sit there quietly as numbers; they literally jump off the screen at you. What are a few of those ‘jumping off the screen’ at us right now?

Capacity in trucking has increased over the last year, but is it where it’s needed? 

Demand has also continued to grow, but one of the age old challenges facing the trucking industry is being emphasized. When demand exceeds capacity to the extent necessary to create pricing power, and that pricing power is sufficient to grow trucking capacity, it still faces further challenges. Where the loads are is seldom where the trucks are. Even in that perfect moment in time in which all the trucks are where the loads are, they pick up those loads, take them to destination and then are out of place again. 

With the market data available on SONAR, we have ability to see all these ebbs and flows happen in real-time. Admittedly, some of these ebbs and flows are exactly as you would expect them to be but seeing the marketplace data as it is actually occurring highlights that where the trucks were needed last week is not necessarily where the trucks will be needed this week. Where the trucks are needed this week is not where they will be needed next week. 

Since early May, the demand for dry van trucks in southern California has been significantly boosted by an almost ever increasing amount as import container traffic has steadily grown and achieved new record highs. As a result, the OTMS (Outbound Tender Market Share) for the Ontario, CA, region (ONT) grew so much that it eventually exceeded one of the consistently largest outbound markets in the country, Atlanta (ATL), peaking in mid-November, as the last of the containers bringing goods to stuff those holiday stockings arrived. Volumes have begun to decline in the ONT market for a very simple reason, if it’s not in the store, distribution center, or fulfillment center already, it is about out of time to get wrapped and put under the tree. 

Unfortunately, not everyone got the memo. As demand falls in that market, and dispatchers make the mistake of thinking, “We have needed ever more trucks in Southern California for months; I better take more loads destined there, send more trucks out there,” we expect rates out of ONT to see some “surprising” pressure to the downside.

Stay tuned, and stay nimble.

Donald Broughton – chief market strategist

Categories: Economics, Insights, News