With tender rejections rising, as measured by the SONAR Tender Rejection Index (STRI). FreightWaves and SONAR CEO Craig Fuller began the webinar with a primer on just what that measures.<\/p>\n
\u201cThe largest motor carriers set the tone for the entire market,\u201d Fuller said. He called them \u201ccore carriers\u201d that shippers will want to do business with \u201ceven when the market rates soften. You\u2019re reluctant to pull freight from them, because when you need a lot of additional trucks, a surge of a project, you can rely upon the bigger guys easier than you can typically rely on a bunch of small guys.\u201d<\/p>\n
But beyond that, \u201cmessages flow from shippers to carriers,\u201d expressing a desire to have freight moved. But carriers can reject that desire\u2013more formally known as a tender\u2013in what Fuller described as the \u201cwaterfall\u201d theory of freight, as the tender moves down the chain before finding somebody willing to take the load. <\/p>\n Tender rejections, he said, \u201ctell us whether or not the carrier is willing to take that load. Do they have the capacity to take it? Do they want to take it? There\u2019s a lot of reasons that carriers will reject freight.\u201d<\/p>\n Those are individual decisions. But taken as a whole, when the STRI is rising, \u201cour fleets are communicating that they have something better to do with that truck. And therefore the more rejections, the more pricing power they gain, and the more optionality they have for something to do with that truck.\u201d<\/p>\n A rejection is a sign that \u201cthey have demand somewhere else.\u201d And that\u2019s why the STVI is such a strong measure of capacity. <\/p>\n How unique is the current market?<\/strong><\/p>\n The answer to that question: very.<\/p>\n Fuller noted comments made by Werner CEO Derek Leathers (NASDAQ: WERN)<\/a>. Leathers said at a recent forum that current rejection rates north of 13% are \u201cCOVID-like,\u201d harkening back to the craziest days of the pandemic when the STRI regularly exceeded 15% and at times climbed above 20% for the nation as a whole.<\/p>\n Fuller reviewed the slow and then rapid increase in the STRI, noting it had begun to tick up in August. \u201cWe started to see that tender rejection cook a little bit right before Labor Day,\u201d he said..<\/p>\n But spot freight rates were moving faster than tender rejections, Fuller said, an unusual combination. \u201cWhat it was communicating to me was that some of those bottom feeders, some of those really cheap motor carriers that were being shut down by this immigration crackdown and compliance crackdown, were effectively being eliminated from the market,\u201d Fuller said. \u201cSo if the lowest price carriers are being eliminated, your average rate is naturally going to go up. And now, if we fast forward a couple months later, we\u2019ve seen rejection rates just continue to go hyperbolic relative to where they were.\u201d<\/p>\n The upward move here in the third week of March is occurring at a time when \u201cit\u2019s typically a decent time of year, but not a great time of year,\u201d Fuller said. That lends support to the idea that the current surge has a strong foundation, he added.<\/p>\n The surge in flatbed rates<\/strong><\/p>\n On earlier State of Freight webinars, Fuller had spoken of the rise in flatbed rates. He revisited the issue in the latest edition.<\/p>\n The housing market, normally a big contributor to flatbed rates, is a \u201cdog,\u201d he said. <\/p>\n The strength in flatbed, he said, looks to be coming from the industrial Midwest. \u201cIt\u2019s coming from old school machinery,\u201d Fuller said. \u201cIt strikes me that things like steel, aluminum and copper are what\u2019s driving this market.\u201d<\/p>\n It\u2019s part of what he called an \u201cenergy buildout,\u201d but it doesn\u2019t have to do with drilling for oil. <\/p>\n \u201cI\u2019m talking about the power generation, the cooling systems going into data centers and the centers themselves,\u201d he said. The list is endless: computer chips to actually power the data centers, steel racks to hold the miles of fiber, and so on. And that is what is moving the market,\u201d Fuller said. <\/p>\n A miserable time to be a shipper<\/strong><\/p>\n That was a comment made in the banter between Fuller and Zack Strickland, SONAR director of freight market intelligence who presented the webinar with Fuller. <\/p>\n The two of them noted a confluence of several factors creating serious headwinds for shippers. <\/p>\n First of all, the demand from them is rising; the SONAR Tender Volume Index (STVI), which measures demand, has been increasing after either being flat or on a downward trajectory in the last year. <\/p>\n The rise in spot rates is leading to higher contract rates in the current bid cycle. As Fuller said, given market conditions, \u201cthey have to.\u201d<\/p>\n Fuel surcharges are rising. Those are designed to be passed down to shippers and away from exposing carriers to higher fuel costs. Fuller said about 80% of freight moves on a truck with a fuel surcharge. <\/p>\n And the availability of trucks is down as a result of the federal crackdown on non-compliant carriers. Fuller conceded he was making a controversial statement, but \u201cthe non-regulated, non-compliant motor carriers provide better service and cheaper rates.\u201d It\u2019s better, he said, because \u201cthey can run 20 hours a day and they\u2019ll run faster.\u201d But it\u2019s also illegal. And despite that, Fuller said \u201cthat\u2019s exactly the way the market has been working.\u201d<\/p>\n Rates & Fuel<\/strong><\/p>\n SONAR\u2019s key rate measurements are the NTIL and the NTI. The latter accounts for fuel costs; the former does not, as the L in its represents \u201clinehaul only.\u201d The NTI has risen recently as the NTIL has dropped slightly, reflecting the increased cost of diesel that is built into the NTI.<\/p>\n Fuller said \u201cthe purpose of the NTIL is to remove the freight volatility signals in fuel, because you can measure that independence.\u201d<\/p>\n Both indices are back to about where they were at the start of 2023, when the great freight recession was swinging into full gear. Fuller said he expected to see new highs in both of them, \u201cbecause we\u2019re moving into the latter part of March and capacity continues to tighten.\u201d<\/p>\n More articles by John Kingston<\/em><\/a><\/p>\n 6th Circuit rejects NLRB\u2019s Cemex rule, dealing blow to unionization efforts<\/a><\/p>\n Ohio jury awards $22.5 million in TQL pregnancy case<\/a><\/p>\n Dalilah\u2019s Law that tightens CDL issuance gets House committee OK<\/a><\/p>\n <\/a><\/strong> <\/a><\/p>\n","protected":false},"excerpt":{"rendered":" … has climbed dramatically. Has the strengthening freight<\/span> market held up against … described as the \u00e2\u0080\u009cwaterfall\u00e2\u0080\u009d theory of freight<\/span>, as the tender moves down the chain … Zack Strickland, SONAR director of freight<\/span> market intelligence who presented the webinar …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[],"class_list":["post-129315","post","type-post","status-publish","format-standard","hentry","category-news","wpcat-1-id"],"_links":{"self":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts\/129315","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/comments?post=129315"}],"version-history":[{"count":0,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/posts\/129315\/revisions"}],"wp:attachment":[{"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/media?parent=129315"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/categories?post=129315"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/new7.shop\/zerocostfreehost\/index.php\/wp-json\/wp\/v2\/tags?post=129315"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}<\/figure>\n
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