Trade war era pattern reemerging in trucking

Freight is moving shorter distances, compounding the effects of waning demand

Chart of the Week: Long haul Tender Volume Index, Tweener haul Tender Volume Index, Short haul Tender Volume Index, City haul Tender Volume Index – USA  SONAR: LOTVI.USA, TOTVI.USA, SOTVI.USA, COTVI.USA

Long-haul trucking demand has eroded at a faster rate than loads moving less than a half a day’s travel, compounding the easing process in the market. Since March 1, the long-haul outbound tender volume index (LOTVI) — which measures tender requests for loads that move more than 800 miles — has dropped 19%, while the City Outbound Tender Volume Index (COTVI) — tenders for loads moving less than 100 miles — has only fallen 8%. 

Looking back to 2019 — a year that was considered extremely challenging for trucking — the market displayed a similar pattern. Overall demand did not drop dramatically, but short-haul freight accounted for a higher percentage of total loads. From mid-January to mid-May of 2019, short-haul demand increased ~10% while long-haul demand dropped ~4%.

One of the main drivers of this pattern shift was the trade war with China. Shippers imported goods earlier in the year to avoid the potential tariff increases. This filled warehouses around the ports and led to a shuffling of goods upstream of the fulfillment centers and storefronts in the major population centers on the East Coast. With inventories piling up, shippers are back in the business of shuffling goods between upstream warehouses. 

Freight moving less than a half a day from the origin does not erode capacity the same way an 800-plus-mile load does. Freight flows are naturally unbalanced in the U.S. with most markets either being (freight) consumption or production oriented. 

The FreightWaves Headhaul Index (HAUL) measures the balance of outbound and inbound load demand. When outbound demand exceeds inbound, the market has a natural undersupply. These markets are represented in blue on the map while the red markets indicate a state of oversupply. 

Drivers can only drive for 11 hours per day due to regulatory requirements set forth by the FMCSA. This equates to about 450 to 550 miles per day on average. 

When freight moves less than 250 miles, carriers can reposition back to the outbound center in the same day and be available for dispatch the following morning with only a short-term hit to capacity. Carriers can cover multiple 100-mile-and-under loads in a day if available. One 800-plus-mile load has the impact of about three short-haul loads on capacity, but that ignores the load balance aspect. 

The freight market is in a period of transitioning to a much softer environment — not just in the way that demand is falling, but the type of demand is also driving it down faster. Pure volumes are an insufficient measure of trucking demand. 

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.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

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