Freight volume bounced back this week after hitting a bottom seven days ago. The national tender volume index (OTVI.USA) has increased 4.5% since January 23. Weather has been the biggest disruption, especially in the Midwest, where temperatures have hit subarctic levels thanks to the polar vortex – Chicago hitting -25 degrees on Wednesday morning. Trucks have trouble operating in these conditions. Pairing with the extreme cold, it is also the end of the month, so there has been some noticeable change of course in the overall market as we approach February.
Though volumes have had a short-term boost, it has not been enough to impact capacity, at least on the national level. The national tender rejection index (OTRI.USA) has dropped a modest 88 bps to 7.65% over the past week, slowing its rate of decent from early January.
OTRI OTRI.CHI)" class="thumb-image" src="https://static1.squarespace.com/static/5899e78b1b10e35238fba886/t/5c523d2c21c67c217bb87c9f/1548893568441/WMU+Chart+1.30.png?format=1000w" />
Chart showing tender rejection rates falling in the U.S. while Chicago capacity tightens in response to the frigid weather. OTRI OTRI.CHI)
Unsurprisingly, of the larger markets, the only one showing any sign of decreased capacity in the form of increasing rejection rates is Chicago (OTRI.CHI). As mentioned previously, there is a maintenance concern with operating trucks in this level of sub-freezing weather as well as the fact that being outdoors in this environment is a health concern. It makes more sense for carriers to shut down than operate on these days due to the potential risks to personnel and equipment. The good news is that temperatures will recover rapidly and be in the 40s in the Chicago area by the weekend.
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Outside of "Chi-beria", there has been a short run bump in volume in several of the larger markets. Atlanta, Harrisburg, and Los Angeles have all had decent increases in volume this week. The L.A. outbound volume found another all-time high this week after declining 14% the week prior. The moves are still appearing to be very regional as shippers attempt to find warehouse space on the West Coast. Inbound Stockton volumes also hit another record high this week.
There have been no signals of any anomalously large volumes of international container shipments as the Freightos Baltic Index rate for China to the North American West and East Coasts have flattened after recovering slightly from a holiday lull. The inbound West Coast rate (FBX.CNAW) fell a modest 0.4% to $2,102 while the East Coast rate (FBX.CNAE) rose 0.6% to $3,292, slightly expanding the Panama spread (FBX.PANA)
For the most part, volume in the top 5 markets had been flat to down coming out of the New Year aside from L.A. After starting the year on a strong note, volumes have dropped into the third week of January.
It is not unusual that freight volumes slide in January, but there have been many macro-level concerns about a cooling economy and the United States' ongoing trade dispute with China have many in transportation concerned we may be seeing some early impact in the freight market. January is essentially the wrong month to make that call.
Spot market rates fall every January along with freight volumes. Even in the unusually active 2018 freight market, spot rates fell 19% before hitting a bottom in early February. The biggest difference between this year and last is the peak was much higher and occurred later than this year.
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