Chart of the Week: National Truckload Index (Linehaul Only), Outbound Tender Rejection Rate – USA SONAR: NTIL.USA, OTRI.USA
Nationwide dry van spot rates minus the influence of fuel jumped 5% last week as carriers rejected contracted truckload tenders at the second-fastest pace of the year, prompting FreightWaves CEO and founder Craig Fuller to call an end to the Great Freight Recession.
The National Truckload Index Linehaul Only (NTIL) measures the average spot rate for dry van loads moving more than 250 miles excluding the total estimated cost of fuel. The NTIL has been trending higher over the past year and a half but has moved erratically, as is the nature of commodities negotiated on a daily basis.
The peak of the truckload market in 2024 occurred around the Fourth of July, a seasonal moment when capacity comes offline and shippers push freight out en masse at the end of the second quarter.
That top should be surpassed in the coming weeks as the holiday shipping season hits its stride. The jump in spot rates is coming as carrier rejection rates have jumped above 6% for just the second time since the middle of 2022.
The Outbound Tender Reject Index (OTRI) measures the rate at which carriers reject load coverage requests from their contracted shippers, something they do not like to do. A “normal” market, which is of course a debatable label, lives somewhere in the 5%-7% range with holiday spikes to around 8%-10% and lulls to around 4%.
The average rejection rate for the past two years has been at or below 4%, including the holidays, which has led to strong downward pressure on contract rates. The overly competitive market has forced many carriers to offer rates at or below operational breakeven levels. This is not healthy or sustainable.
As a result, carriers have been leaving the market at an average clip of around 200-600 per week in 2024, according to Carrier Details analysis of Federal Motor Carrier Safety Administration data. This is on the heels of the most intense growth the industry has ever seen, in 2020-22. This is the definition of an economic bubble bursting. So is this the sustainable flip that many transportation service providers have been waiting for?
Market interrupted
The International Longshoremen’s Association strike occurred over a month ago, but shippers adjusted their shipping patterns to deal with the potential disruptions.
The shift in imports moving into the western ports from the east has been so severe that spot rates for containers from China to the east coast are offering discounts over their much shorter west coast counterparts.
The ports of Los Angeles and Long Beach handle the bulk of the volume, which helps make the Los Angeles-area markets the largest outbound freight centers in the U.S., representing over 7% of the total outbound shipments.
Truckload tender volumes are up about 15% y/y out of the Los Angeles and Ontario, California, markets. Intermodal container shipments on the rails are up an astonishing 32% but have fallen slightly off peak growth as the holidays approach.
Intermodal has been providing a strong relief valve to the truckload market, exceeding pandemic-era peak levels out of Los Angeles. With retailers’ sense of urgency increasing, trucking has become slightly more viable for transcontinental shipping.
That said, spot rates were increasing more than decreasing in most markets across the U.S. as of late last week. The strain of covering large amounts of West Coast freight has limited capacity in all regions of the country.
This holiday shipping season is shaping up to be more volatile than 2023’s. From a purely directional standpoint, the truckload market has been tightening, just at a near-imperceptible rate since May 2023. While the market may lull at times, increased reactivity is a near certainty for the coming year.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
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