Chart of the Week: Outbound Tender Volume Index, Outbound Tender Reject Index, Inbound Tender Volume Index – Ontario SONAR: OTVI.ONT, OTRI.ONT, ITVI.ONT
Southern California’s outbound tender volumes have risen by nearly 20% since the middle of May while inbound volumes are relatively flat, pushing outbound rejection rates to their highest level in over a month. Volumes jumped in April, but this emerging pattern has a different look to it, having been sustained for several weeks now. What does this mean for the rest of the market?
The Southern California markets have been experiencing higher compliance levels since the end of 2020, thanks in large part to a narrowing difference between inbound and outbound freight. Outbound demand has accelerated over the last month as inbound volumes have stayed at their lowest levels since August of 2020. Capacity has tightened significantly since.
The Los Angeles markets have been a focal point for carriers over the past year thanks to the incredible amount of freight coming from China into the ports of Los Angeles and Long Beach. With inventory levels dwindling, shippers were caught off guard as consumers spent their stimulus money on redesigning their homes and purchasing electronics and other durable goods.
Rejection rates peaked around 30% in late August for the Ontario, California, market and began to trend lower outside of the holiday period until about mid-January, when it hit a seven-month low around 14%. Capacity has been volatile ever since, but rejection rates have been averaging about six percentage points lower than the back half of 2020 through the first five months of this year.
Inbound rejection rates have fallen as well as carriers recognized the supply and demand imbalance in the region and rushed to grab the high-mileage, high-revenue freight. Spot rates nearly doubled from May to November in the high-volume LA-to-Dallas lane, according to Truckstop.com.
The recent rise in rejections has led to a subsequent increase in spot rates once again. Carriers will inevitably turn their attention back out West if these volumes persist — something import volumes support.
The difference between this scenario and last year is that demand has increased in other parts of the country as shippers push freight into other ports, trying to bypass the congestion at the ports of Los Angeles and Long Beach. The Port of Savannah has increased its TEU volume by 50% since last year, leading to a 40% outbound rejection rate and making the Southeast the tightest region in the country.
Lost in all of this is the fact the average length of haul for the Southern California markets has dropped around 20% since March, indicating that a lot of the capacity will remain out West. The imbalance in freight flow is already significant from west to east, but in this pattern there may be a trapping effect in which carriers slowly bleed into the West and have less opportunity to get back across the Mississippi River.
Just as it seemed freight patterns had become more predictable with carrier networks adapting slowly, a new one is emerging that could set the market back a few steps.
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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