Hurricane Dorian Strengthening, Freight Markets Reacting

Dorian looking dangerous

Hurricane Dorian continues its trip across the warm open waters of the Atlantic as a high-end Category 2 hurricane, centered 660 miles east of West Palm Beach, Florida. Maximum sustained winds increased to 110 mph last night. Hurricane-force winds (at least 74 mph) extend up to 25 miles from the center, and tropical-storm-force winds (39 to 73 mph) extend up to 105 miles away.

SONAR Critical Events: Hurricane Dorian as of Friday, August 30, 2019, 11:00 a.m. EDT.

There's a good chance Dorian will get stronger, turning into a Category 3 major hurricane today, August 30, 2019. Dorian's exact intensity at landfall, as well as the location of landfall are still difficult to pinpoint. The hurricane's forward speed has slowed down a bit, but could speed up again.

After passing through the northwestern Bahamas this weekend (where a Hurricane Watch is in effect), Dorian's eye will probably strike next Monday night (Labor Day) on the eastern coast of Florida near Palm Beach, but it could hit farther north or south. It could be a catastrophic Category 3 or 4 hurricane at that time. If this forecast pans out, Dorian would cause widespread wind damage and life-threatening flooding from heavy rainfall and storm surge. The National Hurricane Center (NHC) has not issued watches or warnings yet for Florida, and the Florida Division of Emergency Management tweeted this morning that no evacuations have been ordered. This will likely change as Dorian gets closer to the U.S.

Dorian has the potential to become a hurricane of historical proportions. According to NHC records, since 1950 only 10 hurricanes of Category 2 strength or higher have ever been within 100 miles of Dorian's current location. None of them made landfall in Florida. Dorian could be the first.

The Federal Motor Carrier Safety Administration (FMCSA) has announced hours of service waivers and exemptions for drivers assisting with hurricane relief. For truckers hauling relief supplies to Florida today, weather shouldn't be a big problem. Scattered thunderstorms will pop across the Sunshine State today with some pockets of heavy rain. The only regions of possible severe storms are from the front range of the Rockies to portions of Kansas, Oklahoma and the Texas Panhandle, as well as from St. Louis to Cincinnati.

Impact on Brokers

Looking at today's SONAR data from FreightWaves, outbound tender volumes in Lakeland, Florida market (OTVI.LAL) have increased 15 percent over the past few days to 180.93 index points. At the same time, outbound tender rejection rates for climate-controlled, refrigerated trailers known as "reefers" (ROTRI.LAL) remain low at 1.98 percent. Outbound dry van tender rejection rates (VOTRI.LAL) have increased 136 index points to 3.94 percent, but spot market rates have stayed below the contracted rates in the Lakeland market. Rejections are loads that carriers denied for various reasons.

SONAR Tickers: OTVI.LAL, ITRI.LAL

Lakeland is currently a backhaul market, meaning it has more trucks than available freight. This oversupply of capacity applies downward pressure to spot market rates. With Hurricane Dorian expected to strike the Florida coast next Monday night, the Lakeland market will be rattled as residents of Florida evacuate, causing shippers and receivers to close, and the recovery efforts that will start taking shape over the course of next week. Outbound capacity will be cheap as carriers shift their equipment out of the path of Dorian and then tighten just after the storm. Once the storm has passed, carriers may be overwhelmed with capacity as hurricane relief trucks search for loads to relocate their equipment once they have delivered.

This means freight brokers should avoid booking loads into Lakeland until Hurricane Dorian has moved past the Florida markets. Elevate bids well above market rates for loads delivering into Lakeland once the storm has passed. Look for outbound loads to the Atlanta market, Southwest and Midwest to help carriers move their trucks out of Florida. If heavy relief efforts begin, Florida will be flooded with outbound capacity.

Impact on Carriers

With Dorian's looming threat of landfall early next week, it will also be important for carriers to monitor activity not only in Florida, but across the Southeast. Outbound volumes have increased in all the Florida markets except Tallahassee (OTVI.THL). Outbound tender rejection rates jumped out of the Lakeland (OTRI.LAL), Montgomery (OTRI.MGM), Miami (OTRI.MIA) and Mobile (OTRI.MOB) markets yesterday. Inbound rejection rates increased in all Florida markets yesterday, pushing the inbound rejection rate for the state (ITRI.FL) over 3.5 percent, a jump of 48 index points. Outbound volumes increased 3.0 percent from Atlanta yesterday, but had no impact on capacity as rejection rates fell 63 index points to 3.38 percent.

SONAR Tickers: Dorian Freight Markets Dashboard

Carriers should decline all loads inbound to Florida unless you are one of the carriers designated for hauling relief supplies. There is still a lot of uncertainty about Dorian's landfall timing and location. Most of the loads tendered are for early next week when the storm is predicted to hit. If playing the transactional market in the region, get a premium on all freight moving towards the storm.

This is a developing story. FreightWaves will continue monitoring Hurricane Dorian's progress on our SONAR Critical Events, as well as the response from government agencies and logistics companies.

Have a great day, and be careful out there!

Image Sourced from Pixabay

Posted In: NewsMarketsGeneralFreightFreightwavesHurricane Dorian
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