Trucking

Record high rates keep pricing power in the hands of carriers

This Week’s Freight Waves Price dominance index: 75 (carrier)

Last week Freight Waves Price dominance index: 75 (carrier)

Three months Freight Waves Price Dominance Index Outlook: 65 (Carrier)

The Freight Waves Pricing Index Use analysis and data Freight Waves Sonar Analyze the market and estimate the bargaining power of charges between the shipper and the carrier.

The price dominance index is based on the following indicators:

Bid volume surges above 2021 levels

When the Outbound Bid Volume Index (OTVI) reaches its highest level in almost a month, bid volume spikes after the holidays. OTVI has accelerated growth in the past week, beyond what happened in 2021.

Bid volume surges to levels a year ago
Sonar: OTVI.USA: 2021-22 (blue), 2020-21 (green), 2019-20 (orange)
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Bid volumes are currently up 2.61% from 2021, with the largest gap from the previous year’s levels since mid-October (excluding holiday weeks). Since Sunday, OTVI has increased by more than 7.5%.

Last week’s volume level was still depressed due to the holidays, distorting the weekly comparison. OTVI runs at 24.9% (w / w) weekly, but Comp normalizes within a few days.

The bids accepted continue to shine as drivers return to the road and rejection rates have declined over the past week and a half. Accepted bids have increased by 27% over the past week, primarily due to holiday noise related to OTVI. Accepted bid levels continue to be more than 5.5% higher than the 2021 levels and may continue to exceed the previous year’s levels for the foreseeable future.

Holiday noise distorts volume in most of the country.
Sonar: Headhole Index-Weekly Change (HAULW).
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The market-wide volume level weekly comps are basically irrelevant, as the data affected by last week’s holidays are still taken into account. Of the 135 freight markets, 132 reported an increase in bid volume over the past week, with the majority reporting doubling. The digits will increase. Only Pendleton, Oregon, Augusta, Maine, and Bristol, New Hampshire reported a reduction in bid volume w / w.

A better metric for showing volume changes is in the Headhole Index (HAUL). This is the difference between OTVI and Inbound Tender Volume Index (ITVI), which are affected by holiday noise. The map above shows the weekly changes in HAUL. Here, the load imbalance is intensifying in the blue market. HAULW acts as a signal to places where capacity may be tightened, and markets with intensified load imbalances over the past week include Los Angeles, Chicago, Harrisburg, Pennsylvania and Atlanta.

By mode: The Reefer Outbound Tender Volume Index (ROTVI) has continued to rise over the past week, with an additional 13% w / w increase. Comp is very easy, but it should become more and more difficult in the next few days. ROTVI is still down compared to 2021 and is now down 1.79% year-on-year. After the gap widened to nearly 20% in mid-November, reefer volumes were able to close the 2021 level gap in the past month.

Similar to ROTVI, the Van Outbound Tender Volume Index (VOTVI) has increased significantly, up 28% w / w. Van volume has turned positive for the first time since early October, except for holiday-affected weeks. The outlook for van volume during the seasonal soft season of cargo remains very strong, especially as the backlog at the ports of Southern California becomes longer and the warehousing capacity in the region is essentially sold out.

When the driver returns to the road, the rejection rate will eventually decrease

Capacity is back in the market, but it doesn’t bring real peace of mind to shippers. The Outbound Bid Refusal Index (OTRI), a measure of the relative capacity of the market, has fallen by 128 basis points (bps) over the past week. This was the single largest weekly decline since mid-July 2021.

Drivers returning to the road will have a lower rejection rate in the past week
Sonar: OTRI.USA: 2021-22 (blue), 2020-21 (green), 2019-20 (orange)
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The driver’s return to the road after the vacation is slower than the previous year, probably because the driver was able to take a long vacation after earning a record income in 2021.

Despite the decline in rejection rates over the past week, shippers still face difficulties in securing the required capacity. With a short exception at the beginning of December 2021, the rejection rate has remained above 20% for most of the last 18 months. The rise in contract rates failed to bring the compliance level back to a manageable level.

Ultimately, it’s difficult to determine where the rejection rate goes from here. Contract rates can continue to be reset at highs throughout the year, and demand goes nowhere. Therefore, market capacity requirements may be here until at least the first half of the year.

Difficult capacity conditions continue to dominate the country:
Sonar: WRI (color)
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The map above shows the Outbound Bid Rejection Index — the Weighted Rejection Index (WRI), which is the product of weekly changes and outbound bid market share, as a way to prioritize changes in rejection rates. With production capacity tight nationwide, there are many notable markets, the blue market.

Of the 135 markets, 46 reported higher rejection rates in the past week, even though drivers returned to the road.

Where does the capacity go?

Markets such as Ontario, California, Detroit, and Salt Lake City have seen higher bid rejection rates over the past week. The rejection rate in Ontario has decreased by 103 bps over the past week, while in Detroit and Salt Lake City, the rejection rate has decreased by 664 bps and 881 bps, respectively.

In Baltimore, there is a shortage of capacity in a market where bids have skyrocketed over the past week. The bid rejection rate in the market increased by 520bps w / w, the third largest increase in the past week.

Sonar: VOTRI.USA (blue); ROTRI.USA (orange); FOTRI.USA (green)
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By mode: Reefer capacity remains the most difficult equipment type to recover, with rejection rates remaining close to 40%. Over the past week, refrigerated container bid rejection has fallen by 240 bps w / w to 38.76%. Overall, winter months are still here and harsh winter weather is a risk, so freezing capacity can be very difficult, especially near the beginning of the production season.

The decline in van rejection rates over the past week has been more gradual as the Van Outbound Bid Rejection Index (VOTRI) has declined by 109 bps w / w. Van rejection rates continue to be around 20%. As the harbor continues to be congested, the end does not seem to be visible, only the need for already expanded capacity is increasing.

The Flatbed Outbound Bid Rejection Index (FOTRI) continues to decline after setting new highs shortly after Christmas. Over the past week, FOTRI has decreased by 420 bps to 26.49%. The inability to secure the required flatbed capacity has plagued the market compared to a year ago, especially as FOTRI is about 1,500 bps higher than the previous year.

Both contract rate and spot rate hit record highs

Spot rate data available on SONAR from Truckstop.com will be updated every Tuesday with the previous week’s data.

Both contract rates and spot rates hit record highs in the data series:
Sonar: Truckstop.com national spot rate (blue, right axis) and dry van contract rate (green, left axis).
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Truckstop.com’s national spot rate, based on the top 100 lanes of Truckstop.com’s roadboard, bounced back last week as capacity remained tight. National spot rates, including fuel surcharges and other accessories, increased by 2 cents per mile to $ 3.83. Recent increases have resulted in two consecutive highs, breaking previous highs before and after Labor Day.

Of the 102 lanes from the Truckstop.com roadboard, 53 reported an increase last week. Lane fares to Los Angeles all fell back last week as capacity returned to the larger markets in Southern California.

Contract rates rose 6 cents per mile to $ 2.80 last week. Holiday effects are beginning to appear in the data, as contract rates are reported two weeks late. Due to recent increases, contract rates are at the highest level in datasets dating back to January 2017.

The contract rate, which is the baseline hole rate excluding fuel surcharges and other accessories included in the spot rate, maintains the same gap as the spot rate, up 20% year-on-year.

Freight Waves’ Trusted Rate Assessment Consortium (TRAC) spot rates from Los Angeles to Dallas have fallen over the past week. Freight WavesTRAC rates in this dense lane decreased by 15 cents per mile to $ 3.88. The drop in spot rates is the result of capacity returning to Southern California after the holidays.

Sonar: Freight Waves TRAC rate from Los Angeles to Dallas.
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Freight Waves’ TRAC spot rate from Atlanta to Philadelphia continued to rise as Philadelphia’s capacity became tighter. FreightWaves’ TRAC rate has risen 4 cents per mile to $ 4.02 over the past week.

Sonar: Freight Waves TRAC rate from Atlanta to Philadelphia.
For more information on FreightWaves TRAC, click here..

As drivers return to the road following the holiday season, some of the upward pressure on tolls will be relieved. Freight demand is relentless and demand continues to grow throughout the first quarter due to the impact of increased sea bookings, so ultimately, even if capacity is added to the market, the pricing power remains with the carrier.

Contact Kevin Hill for more information on FreightWaves Freight Intel Group. khill@freightwaves.com Or Tony Mulvey at tmulvey@freightwaves.com..



https://www.freightwaves.com/news/record-high-rates-keep-pricing-power-in-carriers-hands Record high rates keep pricing power in the hands of carriers

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