Market Stability Amid Trade War
Recent data from the national Outbound Tender Volume Index (OTVI) shows that national trucking volumes are almost identical to where they were in March of 2018. However, spot rates are down 10-15% year-over-year and tender rejection rates have dropped significantly since 2018 as well. The recent data indicates that 2019 is in the process of experiencing a dramatic increase in contracted freight.
Due to the large volume of freight entering ports, most notably Los Angeles and Long Beach, lead times for trucks have naturally increased. The increase in lead time has resulted in trucks being readily available at the major port locations. The steady flow of freight from ports combined with capacity being available in the right place along with the increase in contracted freight is providing stability to the normally volatile market.
However, 91 of the 135 freight markets in the United States have, within the past week, shown volume increases thus presenting the question… How long will this market stability last?
Opposite to early 2018, the freight market has seen volume increase at a slow but steady rate. Furthermore, this slow but steadily increasing freight volume rate can be attributed to many companies shipping their inventory out of China amid the recent concerns raised by the trade war. Major port cities like Los Angeles and Long Beach have been overwhelmed with record freight volumes. This has created a bottleneck effect in which volume is being processed as quickly as possible, but there is simply too much volume to process all at once.
The stability in the market is attributed to the steady trickle of volume coming from the major port cities, but this stability will only last so long as rate at which the volume is flowing remains relatively the same along with volume levels in other areas of the country. Well over 50% of the country’s freight markets experienced volume increases in the past week. Should volume levels in other areas of the country continue to rise, capacity will eventually disperse across said markets and cause spot-rates to skyrocket. Furthermore, should the market destabilize contracted freight would experience a sharp decline as well. However, if more deadlines to the trade war tariff hikes are publicized, then port cities will continue to see a rise in volume, and the market will presumably stay relatively stable.
BM2 Freight Services, Inc.