Displaced Capacity

Freight Market Update December 8, 2020

Tender volumes have rebounded to the pre-Thanksgiving, “new normal” levels. The shipping trends are mirroring that of 2018 and 2019, but 60% more volume than 2019 (in green) as shown in the chart above. Expanding the chart gives us a great indication of what to expect in the remaining weeks in terms of volumes, by adding 60% to the previous year. However, 2020 is full of curve-balls and we are ready to pivot as needed.

One of those curveballs was in the form of another rate increase. Despite tender rejections taking a surprising dip last week, by dropping 3% (still leaving the national average for rejections at over 25% for 32 days in a row now), rates are up again. Spot rates increased by 3.04% since last week and contract rates increased by 1.6% on average.

In addition to the rise in volume year-over-year, another cause of increased rates is the growth of long haul shipments. Long hauls (indicated by the top blue line in the chart to the right) are 27% of all hauls. These are truckload shipments over 1,000 miles and are compared to shorter lengths of haul. These long hauls take a truck to another geographical area over 1,000 miles away which feeds into the volatile supply and demand issue because it decreases capacity. It decreases capacity because these loads necessitate multiple days on the truck, taking that piece of equipment out of the rotation and then leaving the equipment far from where a lot of the loads are originating. This factor, coupled with the ongoing capacity crunch, and spot rates out-performing contract rates for four months now, has led to the most recent rate increase. With this setup, even if there are volume and rejection decreases, rates will remain on an upward trend as we move through the end of 2020.

One of the reasons that the length of haul has increased is due to the steady flow of goods still arriving from overseas as shown by the following charts, with 2020 in blue. With where we sit in the calendar year, goods need to arrive to their destinations ASAP for the holidays once they arrive in the US. Since truckload shipping is faster than rail, a lot of long-rail shipments have turned into long-haul truckload shipments to finish out the year.

With the additional holiday shipping/shopping, and COVID vaccinations set to start shipping, we are coming up on the busiest weeks of the year. At MegaCorp we continue to pledge to provide reliable service to our clients. You can trust that we will deliver.

Load to truck ratio from the prior 7-day average

About MegaCorp

MegaCorp Logistics, founded by Denise and Ryan Legg in 2009, specializes in full truckload shipments (dry van, refrigerated, flatbed, intermodal, etc.) and less-than-truckload shipments throughout the US, Canada, and Mexico. MegaCorp is committed to creating long-term, strategic partnerships with our clients who range from Fortune 100 companies to regional manufacturers and distributors. We serve all business sectors of the US economy including (but not limited to) food, retail, government, textiles, and metals/building materials. We strive to offer the best to our clients, transportation partners, and employees– It’s the Mega Way!

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