The trade war era model reappears in trucking
Freight is moving shorter distances, compounding the effects of lower demand
Chart of the week: Long-haul tender volume index, Tweener haul tender volume index, Short-haul tender volume index, Transport tender volume index urban – United States SONAR: LOTVI.USA, TOTVI.USA, SOTVI.USA, COTVI.USA
Demand for long-haul trucking eroded at a faster rate than shipments moving in less than half a day, which aggravated the process of market easing. Since March 1, the long-haul outbound tender volume index (LOTVI) – which measures tender requests for loads that travel more than 800 miles – has fallen 19% , while the City Outbound Tender Volume Index (COTVI) – tenders for loads moving less than 100 miles – fell just 8%.
In 2019, a year considered extremely difficult for trucking, the market showed a similar trend. Overall demand did not drop dramatically, but short sea freight accounted for a higher percentage of total loads. From mid-January to mid-May 2019, short-haul demand increased by around 10% while long-haul demand fell by around 4%.
One of the main drivers of this paradigm shift has been the trade war with China. Shippers imported goods earlier in the year to avoid potential tariff increases. This filled warehouses around ports and caused a shuffling of goods upstream from distribution centers and storefronts in major population centers on the East Coast. As inventory builds up, shippers are moving goods between upstream warehouses again.
Freight moving less than half a day from origin does not erode capacity in the same way as cargo over 800 miles. Freight flows are understandably imbalanced in the United States, with most markets either consumption (freight) or production driven.
The FreightWaves Headhaul Index (HAUL) measures the balance between inbound and outbound cargo demand. When outgoing demand exceeds incoming demand, the market experiences a natural undersupply. These markets are shown in blue on the chart while red markets indicate a state of oversupply.
Drivers can only drive 11 hours a day due to regulatory requirements set by the FMCSA. This equates to around 450 to 550 miles per day on average.
When freight is moving less than 250 miles, carriers can reposition to the departure hub the same day and be available for shipment the next morning with only a short run of capacity. Carriers can cover multiple loads of 100 miles and under in one day if available. Loading over 800 miles has the impact of about three short-haul loads on capacity, but that doesn’t take into account the balance aspect of the load.
The freight market is in a period of transition to a much softer environment – not only in the way demand is falling, but the type of demand is also causing it to fall faster. Pure volumes are not a sufficient measure of trucking demand.
About the chart of the week
The FreightWaves chart of the week is a selection of charts from SONAR that provide an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week, a market expert will post a chart, along with commentary, live on the front page. After that, the chart for the week will be archived on FreightWaves.com for future reference.
SONAR aggregates data from hundreds of sources, presenting the data in graphs and maps and providing feedback on what freight market experts want to know about the industry in real time.
FreightWaves’ data science and product teams release new datasets weekly and improve the customer experience.
To request a SONAR demo, click here.
Register today for the Future of Supply Chain #FOSC22
Leading supply chain voices will travel to Rogers, Arkansas, May 9-10.
*Limited time pricing available.