Chart of the Week: Outbound Tender Rejection Index – USA SONAR: OTRI.USA
National tender rejection rates (OTRI) jumped back over 5% this week as winter weather impacted nearly every section of the U.S.
While this probably does not indicate the domestic trucking market is entering a more sustained period of tightness, it is noteworthy that the market is responsive. This is only the third time since October 2022 that the national OTRI has eclipsed the 5% threshold and the first time it was not around the Christmas/New Year holiday week.
Spot rates (excluding fuel) also rose this past week, indicating carriers were able to charge more for ad hoc services. The National Truckload Index (Linehaul Only) bounced from $1.71 to $1.76 from Tuesday to Thursday.
Winter weather events are not new to trucking, but ones that create nationwide disruption are not terribly common. Most of the attention from weather in trucking goes to the tropical systems that hit in the warmer seasons. These have become less disruptive over the years as the Federal Emergency Management Agency has become more efficient in handling its response and landfalling storms have hit fewer large population centers.
Winter weather events can be more disruptive than their warmer counterparts. A recent example of this was the polar front that crippled the energy grid in Texas in February 2021.
An unusually strong Arctic front pushed all the way to the Gulf Coast, coating roads in ice and creating massive power outages that lasted nearly a week in areas that are not accustomed to this type of weather.
The domestic freight market was in the initial stages of stabilizing when the storm hit, and while this was not 100% applicable to the storm itself, the coincidence of tender rejection rates spiking as the storm hit is undeniable.
Besides safety issues and making travel more difficult, winter systems create scheduling problems and backlogs. Shipping and receiving operations shut down when workers are unable to get to their facilities. Trucks have to either wait or travel in challenging conditions to another pickup or to drop their trailers.
Looking at the SONAR Critical Events map showing temperature anomalies — how far above or below average the high temps are for Jan. 19 — all of the Eastern half of the U.S. was showing highs below average. The orange and red circles indicate the highest-risk areas of impact from the weather.
This pattern has been relatively persistent to start the year. A consistent train of systems dropping snow and ice has been hitting the Pacific Northwest, extreme cold hit a large portion of the Midwest, and significant wintry precipitation has hit the South.
Looking at a map of the Weighted Rejection Index on Wednesday, which combines relative demand with weekly change in tender rejection rates, darker shades of blue indicate where the most significant increases in tender rejection rates have occurred. Note that they are not isolated to any one region.
Carrier networks have obviously been impacted as markets like Savannah, Georgia, that have not had snow or ice are showing relatively strong holiday level rejection rate increases. Note they are falling back quickly toward the end of the week.
Higher temperatures are in the forecast for the Eastern half of the country next week, which should help rejection rates fall. Rejection and spot rates do not normally jump like this in January. This could be an early indication of a more volatile market in 2024, or at least one that has increased sensitivity as capacity continues to erode.
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