Post-July Fourth rates climb while lockdowns loom
The post-July Fourth trough didn’t stay for long, as tender rejection rates have climbed back to 15.9%. While this is good news for carriers, consumer spending remains cushioned only temporarily by unemployment checks, which extend only until July 31. In regions where COVID-19 cases continue to grow, lockdowns may be coming. But freight volumes weren’t the main casualty of the first lockdown.
“There are a lot of service-based industries that don’t move a ton of freight on their own,” said Andrew Cox, research analyst at FreightWaves. “If those industries are locked down and the people in those areas aren’t able to go there, they may shift their purchasing to goods. You may see another grocery explosion like we saw back in March and April. The carriers aren’t in such a bad position this time around with the lockdowns as they were the last one. I don’t think they’re going to be as severe.”
“This is a surprising circumstance if you overlay seasonality with what traditionally happens at this time of year,” said Zach Strickland, director of freight market intelligence at FreightWaves. “Normally, we would have seen our seasonal peak way back in June. Tender rejection rates can go up into the holiday July Fourth due to supply side conditions, but this year they’ve come down and then all the sudden they’ve jumped back up to 15.9% when it was 15%. The direction is what’s important, especially at this time of year.”
July is typically a softer month, so these current volume patterns that mirror pre-July Fourth surges are a curious development, one that extends across all regions. Craig Montgomery, senior vice president of global branding at PowerFleet, has observed an increase in manufacturing and logistics activity.
“With the normal summer holiday season disrupted by COVID-19 impacts and many states returning to various stay at home orders, the manufacturing and logistics activity appears to be rising around areas such as DIY home upgrade materials and consumer durables, along with the continual strong demand in food, beverage and healthcare items,” Montgomery said.
The Van Outbound Tender Reject Index chart above shows that while all regions in the U.S. show increasing rejection rates, the Southwest region, in yellow, takes the lead at 21.34%.
The more disruptive markets are Dallas and Fort Worth in Texas, as well as Allentown, Pennsylvania, and Grand Rapids, Michigan. The Atlanta market, however, shows rates climbing for reefer outbound tender rejection, but the overall tender rejection rate is coming down.
“Rejection rates continuing to increase, above the national average, in all of the aforementioned markets are an indication that carriers are having difficulty managing their networks,” said Strickland. “Carriers without existing loads entering these markets should be able to find loads with relative ease on the spot market this week.”
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