Chart of the Week: Outbound Tender Reject Index – Atlanta, Dallas SONAR: OTRI.ATL, OTRI.DAL
Just when shippers and freight brokers thought the U.S. freight market was easing, capacity tightened to record levels in two of the nation’s largest freight centers: Atlanta and Dallas. The outbound tender reject index (OTRI), which measures the rate at which carriers reject electronic requests for capacity from shippers, jumped to its highest values since the index was created back in early 2018. So the big question is why is this significant?
Calling the past year an anomaly would be an understatement in the context of recent history in just about any industry, but most certainly trucking. Normal seasonal patterns have been difficult to identify since the start of the pandemic, although some semblance of pre-COVID behavior still remains around the holidays.
The end of June typically represents the first of two annual “peak” seasons for the U.S. freight market. These peaks are defined by an increase in spot market activity or transactional freight that operates outside the standard contractual agreements between shippers/brokers and carriers. Tender rejection rate increases typically lead spot market rate increases by a few days as they are based on shipper requests in the earliest part of the shipping process.
Over the past year, tender rejection rates and spot rates have been unnaturally high, averaging over 20% since Labor Day 2020 and over $3/mile according to Truckstop.com’s top 100 lanes. For context, national rejection rates averaged just over 6% and spot rates hovered around $2.10/mile in 2019.
Over the past few months, rejection rates have been trending lower, slowly falling from around 28% in late March to 22.5% in early June. Spot rates have been trending slightly lower, but are also propped up by rising fuel costs.
National rejection rates started climbing once again in mid-June with and have seemingly peaked for the season, right around 25%. The fact they have not pushed back closer to the 28% figure is an indication the market has stabilized in comparison to where it was last Thanksgiving and March, albeit slightly.
The aggregate stabilization hides the underlying capacity situation in two of the nation’s most prominent freight hubs, Dallas and Atlanta. The two markets’ outbound tender rejection rates blew past their peak values of the previous year. Atlanta topped out at 28.5% on Nov. 21, while Dallas peaked around 28.2% after the polar vortex event in February. Dallas’ outbound rejection rate was at 30% on Thursday, while Atlanta peaked around 31.2% on June 25. So why have these two markets been more exposed to capacity disruption than others?
These two markets have been competing with increasing demand arising from the Houston and Savannah, Georgia, markets — both of which have seen record import volumes over the past few months.
Import shipments clearing customs are averaging over 40% higher than the previous year in Houston and Savannah in June. Both have been averaging double digit year-over-year percent increases in import shipments since March, which is traditionally the off-season for maritime shipments.
There is still a lot of strain on carrier networks and this occurrence suggests there is still potential for significant capacity disruption throughout the U.S. beyond seasonal expectations.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides 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 of the Week will be archived on FreightWaves.com for future reference.
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