Memorial Day throws off tender volumes and rejection rates this week

This week’s FreightWaves Supply Chain Pricing Power Index: 45 (Shippers)

Last week’s FreightWaves Supply Chain Pricing Power Index: 45 (Shippers)

Three-month FreightWaves Supply Chain Pricing Power Index Outlook: 40 (Shippers)

The FreightWaves Supply Chain Pricing Power Index uses the analytics and data in FreightWaves SONAR to analyze the market and estimate the negotiating power for rates between shippers and carriers.

The Pricing Power Index is based on the following indicators:

Freight demand takes a holiday on Monday

Tender volumes plummeted at the beginning of the week and remained depressed throughout. This decline is to be expected, however, as Monday was a federal holiday. Since the Outbound Tender Volume Index (OTVI) is a seven-day moving average, any day in which volumes are not moving because facilities are largely closed (e.g., Memorial Day) will disrupt week-over-week (w/w) comparisons. 

Tender volumes take a hit from Memorial Day:
SONAR: OTVI.USA: 2022 (blue), 2021 (green) and 2020 (orange)
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Even still, OTVI on Memorial Day was down 18.85% when compared to Memorial Day in 2021. Over the past week, OTVI fell 13.73% w/w and is currently down 17.76% on a year-over-year (y/y) basis. Comparisons on a y/y basis can be thorny because OTVI can be inflated by an uptick in tender rejections. At this time last year, OTVI was greatly inflated by rising tender rejections, whereas rejection rates have since nose-dived to incredible lows.

Turning to accepted tender volumes, which is OTVI adjusted by the Outbound Tender Reject Index (OTRI), we see an expected drop of 13.4% w/w and a slight drop of 0.34% y/y. Again, the disruption to freight flow caused by Memorial Day will skew comparisons for both this week and the next one. If accepted tender volumes have not recovered significantly by Monday of next week, however, then carriers should be sounding the alarm.

Ambiguous signs of a slowdown in volumes are cropping up at American seaports. Last Friday, the number of container ships queued at the ports of Los Angeles and Long Beach — the nation’s busiest container ports — fell from January’s peak of 109 vessels to a 10-month low of 25 ships. While some of this reduced congestion can be attributed to increased activity in East Coast ports, even those are experiencing a lull at present. 

Although a flurry of inbound, trans-Pacific arrivals has been reported for arrivals in late June, the Inbound Ocean TEUs Volume Index (IOTI), a 10-day moving average that measures volumes being booked with ocean container lines, is expected to fall in the coming week. Time will tell whether the recent easing of lockdown restrictions in Shanghai will have an appreciable effect on import volumes in the near future or whether imports from that country will be hampered for an extended period of time.

Don’t be fooled by the blue; volume levels down across the country:
SONAR: Outbound Tender Volume Index – Weekly Change (OTVIW).
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Of the 135 total markets, only 13 reported weekly increases as nationwide volumes take a hit from the federal holiday.

The few markets to see weekly gains in tender volume this week are largely in the South or in the Great Plains. Austin, Texas, which is a mid-level market by outbound volumes, did see a 8.95% w/w gain in freight demand. Austin is known as a manufacturing base for electronics and biotechnology. Notably, Samsung’s largest semiconductor fabrication plant outside of its native Korea is installed in Austin, and there are currently plans to upgrade and expand the facility to produce 3-nanometer semiconductors.

By mode: Given their poor performance over the past several weeks, reefer volumes were not presumed to remain as robust as they did this week. Defying expectations yet again, the Reefer Outbound Tender Volume Index (ROTVI) bounced back quickly after an unsurprising slump on Memorial Day. At present, ROTVI is only down 4.5% w/w. On a y/y basis, ROTVI is down 28% but that difference can largely be attributed to declining reefer rejection rates.

Van volumes were not as resilient this week, as the Van Outbound Tender Volume Index (VOTVI) is currently down 16.5% w/w. As is the case with reefer volumes, VOTVI is down 19.4% y/y but is largely depressed by falling van rejection rates.

Rejection rates erase gains made last week

OTRI has dipped to its lowest level in two weeks, thanks in large part to Memorial Day pausing shippers’ freight demand. Nothing in the data set has yet to challenge the assumption that OTRI has stabilized around a local floor, which is currently being maintained by high prices of diesel fuel and other operational costs.

Memorial Day undoes last week’s bounce:
SONAR: OTRI.USA: 2022 (blue), 2021 (green) and 2020 (orange)
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Over the past week, OTRI, which measures relative capacity in the market, fell to 8.62%, a change of 32 basis points (bps) from the week prior. OTRI is still 1,632 bps below year-ago levels as a sudden rally to double-digit percentages remains increasingly improbable.

The oil market has been subject to some wild swings this week. The European Union has finally agreed to a partial ban on imports of crude oil from Russia, exempting the countries of Slovakia, the Czech Republic and Hungary, all of which threatened to veto proposed sanctions earlier in May. Hungary, a landlocked country, depends on Russian imports for 80% of its total oil, so it is little surprise that it clamored for an exemption from EU sanctions. Following this news, prices of West Texas Intermediate crude — a domestic benchmark for oil production — rallied to almost $120 per barrel.

But the week held a further twist for oil futures: On Thursday, OPEC+, an alliance of OPEC member states as well as a loose coalition of non-OPEC countries like Russia, announced a planned increase in production. This increase was set in order to offset the declining production of Russia, which is now largely isolated from the global oil market. Yet, given that only a few OPEC+ members are capable of shouldering this hike in production — namely, Saudi Arabia and the United Arab Emirates — the announcement did little to assuage fears of a disrupted supply chain. After OPEC+’s meeting, oil prices rallied again, signaling that the planned increase is not expected to compensate fully for the EU ban on Russian imports, doubly so if OPEC+ fails to meet its production targets as it has in recent months.

What does all this mean for carriers? Well, as the world’s largest producer of oil, the United States is expected to step up to the plate and increase its exports, particularly to Europe. An increase in American exports, coupled with the currently low levels of petroleum reserves, could drive prices of diesel fuel and gasoline even higher this summer.

Capacity tightens in Michigan; Memphis, Tennessee; and Indianapolis:
SONAR: WRI (color)
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The map above shows the Weighted Rejection Index (WRI), the product of the Outbound Tender Reject Index — Weekly Change and Outbound Tender Market Share, as a way to prioritize rejection rate changes. As capacity is generally finding freight, only a handful of blue markets cropped up this week, which are the ones to focus on.

Of the 135 markets, 49 reported higher rejection rates over the past week after volumes were suppressed on the week following Memorial Day.

Michigan has been home to some of the most volatile markets in May, with freight demand and rejection rates alike fluctuating rapidly on a weekly basis. This week, rejection rates rose in the state’s Grand Rapids and Detroit markets. Industrial activity is attracting carriers to the region but is not providing enough volume to sustain them, complicated further by Monday’s federal holiday.

SONAR: VOTRI.USA (blue); ROTRI.USA (green); FOTRI.USA (orange)
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By mode: Flatbeds, as is usually the case, remained relatively insulated from general market trends. Despite the federal holiday, flatbeds were still moving freight, thanks to a stir of industrial activity and construction. The Flatbed Outbound Tender Reject Index (FOTRI) fell a slight 42 bps w/w, but is down 178 bps on a y/y basis. This week is the first in many months in which FOTRI is down y/y, as it had previously been the only mode to be in the black on such a basis.

In line with their robust volumes, reefer rejection rates did not budge the needle this week. The Reefer Outbound Tender Reject Index (ROTRI) rose a single basis point w/w to 9.53%, but is still down 2,906 bps y/y. Dry vans were in line with the general OTRI this week, as the Van Outbound Tender Reject Index (VOTRI) fell 21 bps w/w to 8.6%, 1,716 bps below year-ago levels.

National rates remain flat but certain lanes are getting pricier

Spot rates’ growth slows this week:
SONAR: National Truckload Index, 7-day average (blue), dry van contract rate (green) and National Truckload Index [Linehaul Only] (orange).
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It seems that carriers are not quite ready to leave the road for summer fun just yet. In past holiday seasons, such as Christmas and Thanksgiving, carriers took extended vacations to enjoy their record profits. While the week following Memorial Day is typically one in which rates rise because capacity goes offline, carriers this year are perhaps too concerned about the limited availability of freight to take a break. The next major period in which we could expect a reduction in capacity is, of course, the Fourth of July.

Over the past week, the National Truckload Index (NTI) has risen a penny per mile to $2.93/mi. In contrast to the week following Memorial Day in 2021, when the NTI rose nearly 25 cents per mile, the NTI has seen little action this year. Given that OTRI fell this week, carrier rates failing to budge the needle is not surprising. 

The NTIL, which is the linehaul rate, removing fuel from the all-in NTI, has also risen 1 cent per mile as well, indicating that the slight change in rates this week were driven by linehaul adjustments and not changes in fuel costs.

The NTI currently sits 25 cents per mile below year-ago levels, equal to a 7.9% decline y/y. As spot rates hit inflection points, both turning negative on a y/y basis and falling below contract rates for the first time since 2020, the pressure to move contract rates intensifies. 

Over the past week, contract rates, which are base linehaul rates like the NTIL, rose 3 cents per mile to $2.94/mi. Contract rates now stand 18% higher than year-ago levels, but they have not changed drastically since February, when shippers finally began to adjust their contracts to changing market conditions.

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The chart above shows the spread between the NTIL and dry van contract rates. As can be seen, the index has continued to fall to new all-time lows in the data set, which dates back to early 2019. Throughout 2019, contract rates exceeded spot rates, which led to a record number of bankruptcies in the space. Once COVID-19 spread, spot rates reacted quickly, rising to new record highs on a seemingly weekly basis, while contract rates slowly crept higher throughout 2021. 

Once spot rates started the rapid descent from the stratosphere in late February, the spread between contract rates and spot rates narrowed as contract rates continued to increase throughout the first quarter. This caused the spread between contract and spot rates to turn negative for the first time since July 2020.

The spread quickly fell to negative 85 cents, where it stands today. The spread being this wide will place downward pressure on contract rates as the calendar turns to the back half of the year. 

SONAR: FreightWaves TRAC rate from Los Angeles to Dallas.
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The FreightWaves TRAC spot rate from Los Angeles to Dallas, arguably one of the densest freight lanes in the country, bounced back slightly this week. Over the past week, the FreightWaves TRAC spot rate increased by 3 cents per mile to $2.59, undoing last week’s decline of equal measure. Compared to the NTID, the National Truckload Index – Daily, rates from Los Angeles to Dallas are depressed compared to the national average as expected, but that was not the case at the start of the year. When carriers flooded Southern California in January 2022, they pushed spot rates down rapidly.

SONAR: FreightWaves TRAC rate from Atlanta to Philadelphia.
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On the East Coast, especially out of Atlanta, rates are gaining some traction after the holiday weekend. The FreightWaves TRAC rate from Atlanta to Philadelphia rose 14 cents per mile to $3.56, doubling last week’s 14 cent-per-mile increase. Carriers are showing some restraint heading into the Northeast as diesel prices are extremely high and reserve levels are depressed.

As capacity conditions change over the next week, expect that there will be upward pressure short-term pressure on spot rates. The time frame from now to July 4 will be important for spot rates to gain any semblance of momentum to carry into the back half of the year.

For more information on the FreightWaves Passport, please contact Kevin Hill at, Tony Mulvey at or Michael Rudolph at

Source: freightwaves - Memorial Day throws off tender volumes and rejection rates this week
Editor: Michael Rudolph