Outbound Tender Volume In Southern California Is A Flashing Technical Indicator Right Now

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One technical indicator in frieght that is jumping off the screen continues to be Outbound Tender Volume Indices in the Southern California region. In particular, the OTVI.LAX is clearly indicating that the strength in the inbound loaded container flow out of the Long Beach/LA port is continuing and gathering momentum.

Throughout the year the OTVI.LAX has flexed up and down in perfect rhythm with the ebb and flow of additional loaded international containers coming into the Long Beach/LA port. At a value over 260, this index is up over 50 percent in the last four months and is indicative of strong loaded inbound international container flow. We understand that there are other sources of freight in this region, but also understand that the port is the one of the greatest sources of incremental loads (or the lack thereof) and hence becomes the ‘swing factor' for the demand side of the equation in this region. Shippers, brokers, and asset providers that don't have access to this information are operating at a distinct disadvantage to those who do.   

In a report on October 12, we interpreted the strong increase (from under 50 to over 88 in just 4 weeks) in the HAUL.LAX index as evidence that the Long Beach/LA port inbound container flow had returned to positive territory in September. That was confirmed as those ports reported a 2.3 percent increase in loaded inbound containers (on top of a strong 12.4 percent increase last September).  This data has sustained a very positive trajectory, suggesting the October port data (when it is finally released) will be even stronger.

  • This increase in import volume has also continued to buoy demand first in the LAX and ONT markets, and is continuing to spread to ‘destination markets' for rails moving containers from the ports to eastern retail markets. JOT, MEM, DAL, and ATL have all seen strength, and we have used the headhaul index one of the methods available in SONAR to track these changes. The Outbound Tender Market Share offers a similar view from a different perspective (see chart below). 

Bottom line: In the marketplace overall, there may be mixed messages for the overall economy and mixed messages for overall dry van demand, but this data is indicative of a strong holiday shopping season.

This is exactly what we expect as both brick-and-mortar and e-commerce retailers stock up their distribution centers in anticipation of a strong holiday shopping season. Full ocean containers (the 40 foot variety) are moved via rail from Los Angeles to markets such as Chicago (via the BNSF) or to Atlanta via either of the western rail and then most probably handed off to the NSC for transit over the Meridian Speedway to Atlanta. Those 40 foot containers are routinely moved to a nearby warehouse or cross docking facility where, depending on the product, the conversion is roughly 3 to 2 (i.e., three 40 foot containers become two 53 foot dry van trailers). Of course, this doesn't happen if the distribution center being filled is within a few miles of the rail yard, but especially if the last leg of the transit is more than a minimum charge distance, it probably makes sense to convert. What the current daily charge for the ocean container is also enters into the equation, but the point is still the same. Increased ocean container volume flowing from Long Beach/LA to eastern redistribution markets produces a seasonal surge in demand. The stronger the surge, the stronger the holiday retail season is setting up to be.

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