North American Freight Market Insights

TOP STORY: Tension persists as shown in spot and contract markets

Spot market, committed market, and capacity insights
The spot market is a leading indicator of the broader and much larger contract/committed market. Estimates are between 15–25% of the for-hire truckload market is in the spot market. This percentage varies by market cycle and how analysts define spot versus contract. Regardless, it is the minority of the for-hire truckload market.

The spot market also offers some of the best insight to the broader trucking market due to the nature of electronic trading boards that serve as an aggregator of shipper and carrier activity, which is less available in the contract market as relationships are managed in transportation management systems (TMS) of shippers, carriers, and third party logistics providers.

• August 2017 through August 2018 brought a period of tension not seen prior and was often cited as something that would not be repeated any time near term.
• Q2 2020 through early February 2021 was the challenger to the previous tight cycle because of the disruptive effects of COVID-19, economic turmoil, supply chain disruption, and the trucking labor shortage.
• Mid-February 2021 to present sets new records, demonstrates the prolonged impact of the supply shortage, and shows there is no elasticity in the market to handle major events like the February weather and Roadcheck week. These events pushed the market to unprecedented levels of tension and afterwards, held new highs for a prolonged period.

Source: DAT.com. Shown are load to truck ratios (LTR) at a national average for dry van. A ratio of 3:1 is generally considered a balanced market. Below that tends to suggest a plentiful supply of national capacity to over supplied. Greater than 3:1 tends to suggest tension up to undersupplied

National versus regional LTR
While the national LTR is exceptionally high at levels near 6:1, there is material variance at the regional level. Some markets see 1:1 or 1:2 ratios and other markets are well over 20:1 for truckload dry van.

The below map presents the regional diversity of dry van LTR from a regional perspective. This visual shows the import capacity situation from ocean ports and Mexico’s cross-border locations, where LTR's are consistently between 10:1 and 20:1. Capacity is often deadheaded in from meaningful distances for these origin points. The costs of repositioning these trucks gets embedded into the rates paid.

Note: The refrigerated market map is visually similar, but the tension for each colored market has a higher average value than dry van, leaving a higher national average LTR of about 16:1.

The majority of the United States’ for-hire truck market is managed through commitments most often managed via hierarchical route guides. What follows are some perspectives and notes on today’s contract truckload environment.

Route guide performance
Waterfall (or hierarchical) route guides are commonly used to manage awarded freight on lanes with some level of demand pattern predictability. The following insights are derived from C.H. Robinson’s large portfolio of customers across diverse industries throughout the United States.

Two key metrics of route guide performance are first tender acceptance (FTA) and route guide depth (RGD). RGD refers to how far into a route guide a shipper must tender shipments before carriers accept loads, or the average number of tenders per load. FTA is a percentage of how often the awarded primary transportation provider accepts their shipment tenders.

The chart above from TMC, a division of C.H. Robinson, reflects weekly RGD regionally across the United States through the week of September 5–11, 2021

During the week of September 5–11, 2021, the overall RGD across all regions was 1.93, which presents a weekly sequential impact of 9.2% degradation in route guides.

The big story for near term weeks was the impact of Hurricane Ida with landfall in Louisiana on August 29th and remnants of the storm progressing to the Northeast. In the image above, Louisiana is within the South and shows no impact (and possibly improvement) to RGD from the storm. The Louisiana market is not a high freight volume origin market, and it seems metrics of RGD and load volumes can offer some misleading conclusions at these aggregate views. The Northeast shows the most notable impact in route guide performance as rejection of tendered loads spiked and drifted deeper into the route guides. During this same time, FTA held at 81% as it was in July. Through the first half of 2021, FTA has held steady in the range of 80-81%. While the first tender is accepted at the same rate, those shipments that are rejected are slightly more likely to be rejected by the backup provider in August as compared to July and 5% more likely than August 2020.

For 2021, the middle distance loads of 400–600 miles and loads over 600 miles have bounced around at 1.8 to 2.0. For perspective:

• Short haul (less than 400 miles) held relatively steady at a RGD of about 1.4, which is still well elevated from 2019 and H1 2020 levels of 1.1 to 1.2.
• Middle distance (400–600 miles) has been slowly creeping up and hit 2.0 in August, which is much elevated from 2019 and H1 2020 levels of 1.3 to 1.4.
• Long distance (over 600 miles) lost ground, rising slightly to about 1.9 in August, like the other distance bands, this is well above 2019 and H1 2020 levels of 1.1 to 1.3.

Ocean import services continue to experience long delays
Access to 40' high cube containers in China for import to North American ports is becoming scarce. And 100% of ocean capacity is deployed and being augmented by opportunistic smaller carriers for the China to North America trade lanes.

Both Los Angeles and Long Beach continue to experience the greatest delays across North America. But continued congestion at Midwest rail hubs is also influencing ocean carrier strategies for inland moves of full containers.

Ocean carriers are managing the volume/flow of containers to keep the movement of containers more fluid at the inland rail hubs. Accordingly, ocean carriers are increasingly requiring at or near port crossdocking of containers to trucks to minimize the risk of containers getting stuck inland as they are desperately needed back in China for reloading.

Voice of the carrier from C.H. Robinson
C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are insights from our business reviews with our contract carriers each quarter that help present the voice of our contract carriers and shipper customers.

• Carriers report continued struggles with hiring despite compensation strategy efforts.
• Carriers are auditing their book of business in hopes of making their organizations more attractive to drivers, removing commitments to origins and destinations with patterns of high dwell or simply not friendly to drivers.
• Average downtime for maintenance/repairs has lengthened from days to weeks due to part supply chain disruption in the COVID-19 environment. Unseated trucks are increasingly harvested for parts for the active trucks.

The impact of Hurricane Ida
The insights gained from past hurricanes suggest that today's truck market is at such a state of tension that a hurricane landfall event creating a material disruption to a logistics or economic center could be regionally and nationally disruptive.

With the landfall of Hurricane Ida, here are some early insights on the impact to central and Southern Louisiana, New York, New Jersey, and the Philadelphia area.

Inbound loads and pricing insights:
Like other hurricane events, inbound capacity and loads tapered off prior to landfall. As logistics operations are disrupted, outbound loads are also curtailed. This change in a regional or super regional pattern disrupts capacity flows and pricing. Each hurricane event is unique, but like all disruptive events there is a lead up and tail of capacity and pricing disruption.

The below graphic shows both the Louisiana and Northeast regions’ inbound freight and cost per mile before Ida and the days that follow. The vertical dotted line is landfall of Ida in LA on Sunday August 29th and the shaded area are the two highest days of rain fall in the Northeast of September 1st and 2nd. (Depicted is C.H. Robinson data showing week over week change in load volume and cost per mile.)

• Louisiana load volumes declined as expected with cost per mile rising exceptionally high as carriers and drivers declined to drive into the area.
• The Northeast region saw material decline in load volume into the region as the resulting flooding followed the rain, with much less impact to cost per mile.

Outbound from these two regions:

• Louisiana dramatically cut shipping post landfall and cost per mile rose roughly 5%.
• Length of haul exit Louisiana was about 12% longer than normal post land fall however, so a 5% increase in CPM is actually a bit more dramatic in that longer length of haul is typically lower CPM than shorter length of haul.
• The Northeast load volumes dropped as flooding followed the rains, with little impact on CPM broadly across the region.
• Contract truckload route guide insights uses TMC data on route guide depth (see contract truckload section above)
  • The Southern region which Louisiana is within, saw no appreciative change in route guide depth (RGD). This is due to load tender volume virtually gone so as to mask the capacity situation in that metric.
  • The Northeast saw RGD materially spike during this period, suggesting primary transportation providers were declining shipment tenders.

Strategies and best practices during hurricane season

• Prepare for a 2021 market response that demonstrates little elasticity for major hurricane disruptions.
• Consider forward deployment of inventory for susceptible regions or when a storm seems likely to be disruptive.
• Add flexibility to sourcing strategies, time windows, modal options, etc.