Chart of the Week: Outbound Tender Volume Index – USA SONAR: OTVI.USA
After what has felt like a relentless barrage of bad news, an unseasonable upward trend in truckload tender volumes is giving domestic transportation providers the potential inflection point they have desperately been waiting for.
The national Outbound Tender Volume Index (OTVI) — a measure of the electronic requests for truckload capacity from shipper to carrier — is up nearly 7% versus month-ago levels. This is a complete break from tradition — excluding the pandemic-fueled rise in 2020.
A typical summer pattern has tender volumes rise slowly from mid-May to the end of June and then fall back in July. In 2018, tender volumes fell 7% through the month of July; 2019 had a much more moderate 2-3% drop.
The main story of the trucking market has been one of abundant capacity after demand collapsed last year. Tender volumes fell approximately 17% from early March to late April of 2022. Demand leveled off throughout the summer before resuming a slower-paced decline in the second half of the year, falling roughly another 16%.
Through the first half of 2023 there have been few surprises from the OTVI as it has followed a more traditional path after appearing to bottom at a value of 9,940 in February and then climbing 8% higher by the end of June. The pre-pandemic years of 2018 and 2019 had similar increases.
Rates still falling
The jump in July demand has had no impact on either tender rejection rates or the spot market. Capacity remains abundant and capable of handling the unseasonable surge for the most part. The national Outbound Tender Reject Index (OTRI) fell from a July 1 peak value of 3.89% to 2.9% on July 18. It rose to 3.23% by Thursday, which is marginal at best.
The National Truckload Index (NTI), which measures spot rate trends, has dropped 4.3% since July 6 with no signs of changing course.
Anticipated disruptions
While nearly impossible to tell the exact reason for the unusual strengthening in demand, there is credence to the theory that the recent labor disputes around LTL provider Yellow and UPS may have spurred some activity from the shipping community to try and get in front of or deal with any potential service disruptions that may result from either provider ceasing service.
The past few years are still relatively fresh on the minds of transportation and supply chain managers who directly felt the repercussions of a market in which capacity tightened quickly. An ounce of precaution is worth a pound of cure.
Early replenishment
While the growth has been relatively dispersed across the country, the West Coast is responsible for the bulk of the increase and subsequently long-haul dry van demand has also had the strongest jumps.
This could simply be an early “peak season” for freight replenishment that normally occurs in September and October. With rates on the floor, some shippers may be taking advantage of a stable environment with the future still uncertain. This would require a return to confidence in their demand planning, something that has been largely absent since 2020, but it does line up with the current maritime narrative.
Both of the aforementioned theories would be a short-lived event for the freight market. A more sustainable cause requires economic support, which is difficult to find amid a weakening consumer environment.
Government spending to the rescue
There is little reason to expect growth from the retail or housing markets. The automotive sector is starting to show signs of slowing as well. Government spending from the infrastructure bill could finally be having an impact as bridge and tunnel investment is trending significantly higher, but it is difficult to make that connection with long-haul dry van freight.
Of course, there doesn’t need to be one simple reason as it could be a combination of multiple things. Transportation providers should take the current situation as a near-term win but remain cautious. If anything, this break in seasonal trend shows that we are still in a relatively unpredictable environment.
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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