Good day,
The summer slump in freight markets continued last week, with the national outbound tender rejection index (OTRI.USA) falling to close to its lowest level year to date. The outbound tender rejection index measures the percentage of loads tendered by shippers which are rejected by carriers and indicates the balance of supply and demand in freight markets. An unusually low OTRI does not mean that volume has completely fallen off; it simply suggests that for the time being, capacity and freight are in equilibrium and carriers feel that contract freight is fairly priced.
The index is currently at 19.30%, just .18% or 18 bps above the lowest point in 2018. This critical technical point is of interest because if we fall below, it likely means that the summer slow-down will continue for a few more weeks and spot pricing will also fall. Based on the performance of the publically traded truckload stocks over the past two weeks, any sign of weakness will probably reinforce the view from Wall Street that the trucking market has peaked, whether merited or not.
Did you know?
Walmart has 4,700 stores in the United States, with a store within 10 miles of 90% of the U.S. population.
Quotable:
“We’re going to look at the needs of drayage and short-haul local drivers as well as long-haul operators. Truck parking is a safety issue.”
-Caitlin Hughes, Director of the Federal Highway Administration’s Office of Freight Management and Logistics
In other news:
Walmart discovers why the ‘last mile’ is the hardest
Despite having 4,700 U.S. stores within 10 miles (16 km) of 90 percent of the U.S. population, Walmart is still trying to figure out how to efficiently make deliveries and has poured billions of dollars into e-commerce in recent years. (Reuters)
The Big Short’s Eisman is shorting Tesla for ‘execution problems’
Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis, is shorting Tesla Inc. over a series of doubts about the electric-car maker. (Bloomberg)
Retail returns specialist Optoro raises $75M in new funding
Logistics technology specialist Optoro Inc. has raised $75 million in new funding to expand development and sales of its software aimed at helping retailers handle returns and resales of merchandise, a capability taking on greater importance under e-commerce. (Wall Street Journal)
Smaller crop and growing domestic appetite ease China tariff pain for US cherry exports
Weighed down by almost 50% tariffs, US cherry exports to China have fallen, but the pain for growers has been mitigated by a combination of lower volume and a resilient domestic market. (The LoadStar)
Risks to Middle East oil and gas shipping routes
Saudi Arabia said it was suspending oil shipments through the Red Sea after Yemen’s Iran-aligned Houthis attacked two crude tankers, underscoring risks caused by the conflict in the world’s top oil exporting region. (Hellenic Shipping News)
Final Thoughts:
The gross domestic product of the United States grew 4.1% in the second quarter, the fastest quarterly rate since 2014, but by this point the GDP is a lagging indicator—we’re well into the third quarter, and the expansion is projected to cool. We may already be seeing that in the freight markets, which, unlike GDP, are a leading indicator for economic activity. Part of the GDP growth we saw in the second quarter was an unusually high rate of exported goods like soybeans from farmers keen to move their crops before tariffs hit.
Hammer down everyone!
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