Peak domestic freight volumes are likely behind us. For two straight days, the outbound tender volume index has declined a total of 3%. However, the truckload volume is still well above any other time in the index’s history and has risen 3% on a week-over-week basis.
We estimate only 40% of domestic freight volumes are safe from lockdown and recessionary pressures. These include food, medical supplies and consumer packaged goods (CPG). That being said, the panic buying and hoarding by consumers in the preceding weeks pulled forward much of the demand for CPG (think about those who bought seven months of toilet paper).
That leaves most of the freight throughput static while we are operating in this environment. The demand for durable goods, industrial production, autos and many more industries will be all but non-existent for the foreseeable future. We are fully expecting volumes to rapidly return to, and soon thereafter fall below, normal springtime levels.
While five of the 15 markets FreightWaves tracks were positive on a week-over-week basis, the ratio of positive markets is down substantially compared to recent weeks and so are the absolute weekly percentage increases. Markets with the largest gains in OTVI.USA were Savannah, Georgia (8.67%), Houston (4.17%) and Memphis (4.04%). On the downside, this week saw a decline in Los Angeles (-11.23%), Elizabeth, New Jersey (-10.01%) and Atlanta (-7.61%).
Tender rejections rise sharply this week
The outbound tender reject index (OTRI) now sits at 19.14%, which is higher than any point in 2019 and to-date in 2020. This marks three straight weeks of rapid movement to the upside, indicating more carriers are declining contracted rates in favor of the spot market. While the pace of acceleration slowed this week, carriers are still wielding significant pricing power in spot rate negotiations.
Capacity will remain tighter than it would in a balanced market for the next few weeks, but this week may be the peak for OTRI. Volumes will soon dissipate due to retail, food, hospitality, manufacturing and many other industries halting operations.
For more information on the FreightWaves Freight Intel Group, please contact Kevin Hill at khill@freightwaves.com, Seth Holm at sholm@freightwaves.com or Andrew Cox at acox@freightwaves.com.
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