Chart of the Week: National Truckload Index (Linehaul Only, Outbound Tender Reject index – USA SONAR: NTIL.USA, OTRI.USA
The Labor Day holiday was not a strong catalyst of disruption to the U.S. trucking market. Both spot and rejection rates reacted minimally to what was the most volatile holiday period during the pandemic years.
National dry van spot rates declined heading into the holiday while tender rejection rates got a short-lived boost from 4.3% to 4.9% before falling back below 4.3% this past week.
Historically speaking, Labor Day is not a strong driver of volatility in the trucking industry. Most of the disruptions occur from events landing around the holiday, such as hurricanes and strikes. September is the peak of the Atlantic hurricane season, and some of the strongest landfalling storms have hit in late August and early September. This year has been surprisingly quiet so far in the tropics.
The September freight market is also impacted by harvest season. Apples, potatoes and grain crops all have their biggest pushes of the year at this time. Reefer rejection rates were trending higher out of the Northwest, where the majority of nongrain crops originate, but have fallen back uncharacteristically.
September is also the start of long-haul freight season in the U.S. Post-Labor Day demand for loads moving more than 800 miles from origin generally increases from 8%-10% versus summer levels. This typically follows the container import peak, which occurs in July and August. Most of that comes into the Southern California ports from Asia.
The flow of freight from Asia to the U.S. population centers in the Eastern half of the country is largely fueled by the retail sector as companies prepare for the holiday season. Most of the nation’s largest ports have had significant annual growth, but especially the ports of Los Angeles and Long Beach.
Long-haul season arrived earlier than expected this year as demand jumped 22% out of Los Angeles from May to June, driven by the earlier-than-expected increase in imports.
Tender rejection rates spiked to two-year highs out of Southern California this summer as many carriers were caught out of position for the unseasonal increase in demand. Rejection rates have recovered since and fell even further heading into Labor Day. This suggests the summer demand may have pulled capacity into the region as there is still sufficient slack in national capacity.
Import demand has not subsided, so another few factors are keeping truckload volumes tamed.
The first appears to be that intermodal has taken share. International and domestic loaded container volumes are up about 15% in total over late June out of Southern California. Long-haul truckload tender volumes are down 6%-10% in the same time frame.
The other factor keeping truckload volumes down is that inventory levels have grown as more goods are stuffed into upstream warehouses versus moving across the country. In August, the Logistics Managers’ Index inventory level component showed the second-highest expansion figure since early 2023.
Volatility ahead?
The threat of an ILA strike in the Eastern ports is influencing shippers to order ahead of time and may keep demand elevated out of the West Coast later than usual.
Intermodal becomes less viable the closer it is to the holiday period due to an increasing sense of urgency.
Interest rate cuts are all but a certainty, which could help release some amount of pent-up demand.
And more than anything else, no one is really certain just how oversupplied the market is at this point. Carrier exits are still outpacing new entrants, meaning there are fewer operators available every day.
While Labor Day spot rate and capacity data may be suggesting the domestic trucking market is still well served, it doesn’t remove the potential for a volatile holiday shipping season.
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