Freight Capacity Rebounds as Rejection Rates Ease - Sobel Network Shipping Co., Inc.

Freight Capacity Rebounds as Rejection Rates Ease

This week’s Pricing Power Index is informed by the following trends:

Volumes Rebound After Holiday Disruption

The holiday season significantly impacted freight volumes, as seen during major national holidays like New Year’s, Christmas, and others. This year’s dual midweek holidays contributed to the typical seasonal drop in freight activity.

SONAR Insights:
The Outbound Tender Volume Index (OTVI), which measures nationwide freight demand, has begun to recover, rising 19.3% week over week. However, volume levels remain 6.98% lower compared to the same period last year. Upcoming events, including potential labor disputes and the Lunar New Year, might drive short-term volume increases, although no significant forward-pull in ocean shipments has been observed yet.

Contract Load Volumes Gain Momentum

The Contract Load Accepted Volume (CLAV) index, reflecting contracted freight activity, saw a more significant weekly increase of 22.66%, aided by declining tender rejection rates. However, CLAV remains 9.5% lower year-over-year. Despite strong retail spending during the holidays, cautious consumer behavior could temper growth in freight demand, particularly if industrial activity remains subdued.

Regional and Modal Performance

Across 135 markets, the majority experienced an increase in tender volumes post-holiday. However, high-volume regions like Ontario, California, saw more modest gains. Recovery was notable across freight modes:

  • Dry Van: Weekly volume growth of 19.8% but still down 10.2% year-over-year.
  • Reefer: Weekly volume increase of 8% with a 6.5% year-over-year gain.
  • Flatbed: Volumes showed resilience, with seasonal pressures expected to ease in warmer months.

Tender Rejection Rates: Gradual Decline

Tender rejection rates have fallen by 256 basis points to 7.13%, signaling capacity returning to the market. While rates are 236 basis points higher than last year, this marks a healthier balance between demand and available capacity. Regional data showed notable declines in key markets, including Atlanta, Dallas, and Ontario, California, though some areas like Savannah, Georgia, experienced increases.

Spot Rates Stay Resilient

Despite falling rejection rates, spot rates have maintained upward momentum. The National Truckload Index (NTI) rose by 3 cents to $2.49 per mile, with year-over-year increases narrowing. Dry van contract rates, which had spiked during the holidays, stabilized but remain slightly higher than last year.

Lane-specific trends indicate sustained demand on key routes:

  • Los Angeles to Dallas: Spot rates fell by 3 cents but remain above contract levels, suggesting robust demand.
  • Atlanta to Chicago: Spot rates climbed to six-month highs, surpassing contract rates and signaling tighter conditions in this lane.

As the freight market adjusts to post-holiday dynamics, the combination of recovering volumes and stable spot rates provides an optimistic outlook for improved conditions later in the year, despite near-term challenges.