This could be the hottest summer ever — for freight

Chart of the Week:  Inbound Ocean TEU Volume Index , Van Outbound Tender Volume Index – USA SONAR: IOTI.USA, VOTVI.USA

The Inbound Ocean TEU Volume Index (IOTI), which measures maritime bookings for twenty-foot equivalent units for U.S. imports, is set to hit an all-time high this week. The IOTI starts in January 2019 but  covers one of the most active periods in maritime shipping thanks to the pandemic. With imports being tied more closely than ever to surface freight volumes and transportation demand, this could be a signal of an extremely active summer for domestic surface transportation providers.

Import booking activity measures freight that will hit the U.S. two to six weeks in advance and has been connected to surface transportation volumes over the past year. After a quicker-than-anticipated recovery in consumer spending on durable goods last spring, shippers found themselves low on inventory and began placing orders at a record pace last May. 

Whereas the connection between truckload and import volumes has not always been this close, the urgency of the past year has closed the gap between the time the freight is on the ship to the time it moves on a truck. 

With many shippers caught off guard by changing consumer behaviors, there was no budget or plan for what occurred in most of 2020. Companies have found themselves playing catch-up most of the year, and the recent surge in consumer spending thanks to a new stimulus bill and continued quarantine this winter has not helped them recover. 

The IOTI shows bookings up to a week in advance, meaning it is measuring freight that is being requested to leave their ports of origin over the next seven days. The spike in bookings over the next week is on the heels of a longer-running increase that began in late January. 

Bookings do not necessarily translate to freight being moved, as the maritime providers do not necessarily accept the request, similar to domestic truckload, but it is a sign that shippers are becoming increasingly active in trying to secure capacity on the water. Looking at the Van Outbound Tender Volume Index (VOTVI), there are similar moments when shippers appear to spam their providers just to increase the odds of success. 

This type of activity keeps upward pressure on rates as little to no gains in total available capacity are occurring, essentially bidding up the price. The Freightos Baltic Daily Indices that  measure the average spot price for shipping a forty-foot equivalent unit across the water from China to North America’s East and West coasts continue to hit all-time highs. 

The East Coast rate broke $6,000 for the first time this week as shippers are booking more loads to the eastern half of the U.S., attempting to bypass the port congestion in Southern California. This is another sign that freight volumes will continue to flood the U.S. in the coming weeks. It is also a sign that shipping patterns are changing, which will potentially put more pressure on carrier networks as more freight enters in areas they are unaccustomed to servicing at volume. 

The Savannah and Houston truckload markets have become extremely tight over the past few weeks as imports flood the ports. Chart: SONAR – Outbound Tender Reject Index Houston and Savannah

The Houston and Savannah, Georgia, markets have both seen trucking volumes surge over the past month and capacity tighten to record levels — tender rejection rates hit all-time highs in both markets over the past two weeks. 

Most carriers have focused on getting trucks to Southern California to take advantage of high mileage, high-paying loads that keep utilization numbers high and margins wide. Houston and Savannah tend to have lower-mileage and smaller-margin loads thanks to regional density of carriers and destinations. 

There is already enough freight to keep carriers busy on the West Coast and it is very difficult to alter networks quickly. With more freight on the way, this summer may be the hottest (market) on record.

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 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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