Chart for the week: Contract Load Size Indicator, External Bid Size Indicator – USA Sonar: CLAV.USA, OTRI.USA
Carriers are accepting the same load volumes as they were in April 2023, near the theoretical limit of the last downturn in the freight market. Denial rates (the rate at which carriers reject load coverage requests from contract shippers) are more than double what they were then. This is further evidence that a significant amount of supply has left and continues to leave the domestic truckload market.
Acceptable contract size indicator (Claf) It is a measure of accepted load bids from shipper to carrier. It is different from Sonar Indicator of the volume of issued bids (Otvi) In that it does not count bids rejected by carriers. More rejections mean that providing truckload capacity will be more difficult. When comparing the tender rejection index issued (others) For CLAV, we can estimate how balanced the supply and demand curves are in the truckload market by looking at periods of similar acceptance volumes and comparing the rejection rates at those times.
In May 2023, CLAV was 13,951 while OTRI was 2.92% – and carriers were essentially automatically accepting loads indiscriminately. Last Thursday, the CLAV was at 13,910 while the OTRI was at 6.48%. Although not all loads were created equal, average unloading lengths were also similar between the two periods. Seasonality is one factor, but trends are the main one.
Accepted volumes trended downward from early September through November before stabilizing. Rejection rates have been increasing since early October, rising from about 4.5% on September 29 to 6.5% on December 12.
This rise is more than the usual seasonal spike resulting from reduced holiday capacity. The only year in which rejection rates increased steadily over this period was 2019. In every two years outside of 2019 and the current year, rejection rates are either flat or declining heading into the Thanksgiving period.
Looking at OTR’s historical numbers from the past seven years, the downward trend is present for most of them. This is in line with a bit of a decline in demand resulting from the Labor Day weekend spike.
Still missing from the current year’s OTRI is the Thanksgiving week spike, which has been muted for the past three years. But the upward trend in rejections is a new development, especially since it does not appear to be driven by a demand-side event.
Comparing OTVI (Total Tenders) and CLAV (Tenders Accepted) over the past year, the gap is steadily increasing. This is a result of the limited availability of trucking capacity. The gap is represented by OTRI. The interesting part is that both CLAV and OTVI are declining. Most people familiar with transportation markets believe that a transitioning market will have a flat to slow-growing CLAV and increasing OTVI, which is what happened in 2020 as shown below.
This is a very obvious detail that the capacity is wearing out at an incredibly fast clip. It is difficult to measure this using traditional figures.
Carrier Details puts an additional layer of cleanup on FDCPA data to arrive at net changes (cancellations plus additions) in active operating jurisdictions reported weekly. This data suggests there is a slowdown in wear, but does not take into account the size of fleets or the removal of tractors from ongoing operations. This is still a good measure of market conditions and health. Any time the situation is negative, conditions are very difficult for carriers. It is rarely in this state for long periods of time because it is biased toward growth. Two years in which we averaged more than 350 net carrier exits per week is historic and unprecedented.
The bottom line is that capacity drain is finally starting to show up in the form of sustainably higher rejection rates. There is certainly a level of seasonal pressure on the market right now that wasn’t there in May 2023, but the spread is not straight forward seasonal. Rejection rates and spot rates may fall after the holidays, but they should not be taken as a quick return moment.
The FreightWaves chart for the week is a specific chart from Sonar Which provides an interesting data point to describe the state of shipping markets. The chart is chosen from thousands of possible charts available on Sonar To help participants visualize the freight market in real time. Every week, a market expert will post a chart, along with comments, directly on the front page. The week’s chart will then be archived on FreightWaves.com for future reference.
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