Freight Market Update October 2021
The Peak That Turned Into a Plateau
To no one’s surprise at this point, freight volumes continue to come in at an all-time high for where we sit in the calendar year. Daily volumes have been holding steady at 15,500, on average, a day on the index. 2021 Fall volumes are now mirroring 2020 with about a 2.5% increase. The chart to the right has been expanded to show the remainder of 2021, compared to previous years, for a general idea of what to expect. This expectation includes about 60% more freight than Q4 2019 and trending towards 5% more freight than in Q4 2020.
As the industry has become more accustomed to the abundance of freight volumes, tender rejections are about 4% less than they were at this time last year but are still coming in at 21.77%. Historically, during the month of October we could expect a loosening of the market between Labor Day and the holiday surge, but this is hardly noticeable going into “peak season.” This is because peak season is when demand significantly outweighs the supply, so technically we have been in peak season for 16 months now, thus making the expected, slight “October-loosening” barely noticeable in most industries and markets.
Even with tender rejections “down”, rates year-over-year are significantly up for all equipment types and for both contract and spot. When compared to this time last year, reefer spot rates are up 26%, van spot rates are up 20% and flat spot rates are up 26%. Regarding contract rates, reefer is up 16% year-over-year, van is up 26% and flat is up 30% from October 2020.
The struggle to add new equipment and drivers into the industry, the inverted contract and spot rates for most equipment types, paired with the abundance of freight will keep rejection rates and costs significantly up.
When will rates go down? Most predictions have been pushing the goalpost back for almost a year now when estimating when the market will loosen again. Some leading industry economists are forecasting that it won’t be until the end of Q1 in 2023 for when we will start to see a significant shift in the supply chain, stating that all of 2022 will continue to be a “peak-season”. Inventory is low and it’s a constant battle to keep the shelves stocked. The replenishment concept may take us through the second quarter and into the summertime. If it goes a bit longer than that, we enter the full swing of produce season which quickly flows into the holiday season.
This may sound extreme, but it is a deep-rooted issue that won’t be fixed when we flip the calendar to 2022. It will take at least a year to get new truck and vessel equipment added to eliminate some of the strain. The supply chain has been impacted by the supply chain – meaning it is hard to get new equipment built in a timely manner when some parts of the equipment are also stuck in the backlog of shipments and orders coming from overseas, and of course, the labor shortage is a factor as well. Eventually, there will come a day when consumers start moving discretionary income back into the service sector, but it is not there yet. When that happens, and when new equipment is added, we will start to see things level off.
In the meantime, the congestion at the ports has not improved, with a near-record 68+ container ships waiting to dock and offload between the Port of Los Angeles and Long Beach. The average container ship takes 1-3 days to unload, meaning this bottleneck could potentially last for months as more ships arrive every day. A third shift has been added to help some ports catch up, but the charts above and below indicate what is on the way to the US West Coast and US East Coasts, from just China; while they show a slight decrease, from last week, there is a significant amount on the way.
As always, MegaCorp is here to help. You can rely on us in any market and trust that we will deliver.
Load to truck ratio from the prior 7-day average.
The charts below are load to shipment ratios. For example, red indicates one truck for every 45+ shipments.
About MegaCorp Logistics
MegaCorp Logistics, founded by Denise and Ryan Legg in 2009, specializes in full truckload shipments (dry van, refrigerated, flatbed, etc), less-than-truckload, and intermodal 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! You can trust that we will deliver.
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