Market Stability Amid Trade War
Recent data from the Outbound Tender Volume Index (OTVI) shows that national trucking volumes are almost exactly where they were last March in 2018. However, spot rates are down 10-15% and tender rejection rates have also dropped significantly since last year. This recent data indicates that 2019 might experience a dramatic increase in contracted freight.
Due to the large volume of freight entering ports, most notably Los Angeles and Long Beach, lead times for trucks have naturally increased. This increase has resulted in trucks actually being available where they are needed most. The steady flow of freight from ports, combined with available capacity in the right place and the increase in contracted freight, is providing stability to the typically volatile market.
However, 91 of the 135 freight markets in the United States have increased in volume in the last week. This presents the question… how long will this market stability last?
Opposite to early 2018, the freight market has seen volume increase at a slow but steady rate. This slow but steadily increasing freight volume could be attributed to many companies shipping their inventory out of China amid concerns raised by the recent trade war. Major port cities like Los Angeles and Long Beach have been overwhelmed with record freight volumes. This has created a bottleneck effect: volume is being processed as quickly as possible, but there is simply too much to process all at once.
Market stability is attributed to the steady trickle of volume coming from these major port cities, but this stability will only last so long as volume remains relatively the same across the country. Well over 50% of the country’s freight markets experienced volume increases in the past week. Should volume levels in other areas of the country continue to rise, capacity will eventually disperse across said markets and cause spot-rates to skyrocket. Furthermore, should the market destabilize contracted freight would experience a sharp decline as well. However, if more deadlines to the trade war tariff hikes are publicized, then port cities will continue to see a rise in volume, and the market will presumably stay relatively stable.
BM2 Freight Services, Inc.
Phone: (859) 308-5100