At Spot, we understand the vital role that up-to-date information plays in navigating the dynamic logistics market. Each month, we bring you a comprehensive logistics market update. We dive into the latest trends, challenges, and innovations shaping the logistics sector. Join us as we empower you with the knowledge needed to make informed decisions in this fast-paced industry.
Demand Levels & Outlook
The Freightwaves Outbound Tender Reject Index (OTRI) dropped slightly to 4.49%. This is 1.11% higher than last year and 0.64% higher than in 2019. This shows that rejection rates are rising, putting pressure on shippers and increasing costs in the trucking industry.
In the residential sector, sluggish single-family home sales and weak investment have kept building material demand low. Meanwhile, the agriculture, automotive, and energy sectors of the trucking market are reducing freight volumes. Agriculture is dealing with low crop prices, automotive shipping has decreased due to weak sales, and energy is experiencing a 14% drop in oil and gas drilling compared to last year. This lack of investment in these sectors reflects an industry trend towards reduced freight volumes and suggests that the freight recession will continue until 2024. As a result, the recovery of the truckload market may not happen until around mid-2025.
Despite a 1.24% week-over-week dip in tender volumes, the year-over-year figure is up 1.87%, driven by a 25% increase in short-haul freight. In mode-specific insights, the dry van market declined 1.8% last week, dipping 0.05% year-over-year, while the reefer market saw a 0.92% decline last week but remains up 1.35% year-over-year, with rates rising 13% since April.
Supply, Capacity, and Carrier Operating Costs
The market saw mixed capacity dynamics, with only 53 of 135 markets experiencing rising rejection rates, down from 67 last week. Southern California declined, while Houston’s rates rose by 2.49%, signaling volatility in freight prices.
In recent freight news, the trucking industry is adapting to fluctuating market conditions. According to the latest data, the national average diesel price increased by $0.03 per gallon, now standing at $4.56. This rise in fuel costs is likely to affect overall transportation expenses and may impact contract negotiations in the coming weeks.
Dry van rejection rates slightly decreased by 0.06% week-over-week but remained 1.17% higher year-over-year, reflecting a stable yet tightening market. Reefer rejection rates dropped by 0.48%, though Ontario, CA, saw a 5.80% spike, with rates up 2.76% year-over-year. Flatbed rates increased by 0.36% weekly but are down 2.14% year-over-year, indicating pressure from the industrial sector. Dry van spot market rates held steady at $2.29 per mile, up $0.07 year-over-year, while contract rates rose to $2.31 per mile, $0.05 lower year-over-year. The narrowing spread between spot and contract rates suggests potential shifts around Labor Day. The dry van market remains subdued, with possible pressure on the reefer market as carriers switch sectors. Without a demand surge, significant market growth is unlikely despite capacity reductions.
Contract & Spot Market Rate Trends
In August, news in trucking was notably stable, with spot freight rates remaining steady at levels similar to those observed around Memorial Day. Although rejection rates, a key indicator of freight market shifts, have remained unchanged, the approaching Labor Day holiday may lead to a rise in these rates, potentially causing a surge in spot rates akin to the Fourth of July.
The Freightwaves National Truckload Index (NTI) has slightly decreased by $0.02 per mile to $2.29 per mile but is still up $0.06 per mile year-over-year, reflecting a 2.7% increase. The NTIL, or Linehaul Index, also saw a minor decrease to $1.71 per mile, though it remains $0.14 per mile higher than last year.
Dry van contract rates have remained steady at $2.31 per mile over the past week, showing stability in 2024 but a slight year-over-year decline of 5 cents per mile, or 2%. The spread between NTIL and dry van contract rates is nearing pre-pandemic levels due to recent increases in contract rates.
In the refrigerated load market, spot rates have been rising, with the Refrigerated Truckload Index up 13% since April. These increases are attributed to broader market conditions rather than seasonal factors. However, contract rates for refrigerated loads continue to face pressure, with expectations for further rate reductions and no major demand shocks.