So, what should I think about that?
(The glass holding tendered contract loads is not overflowing anymore.)
Why do I care?
(Because it means there isn’t a “U” turn in decreasing rates or load volumes in the foreseeable future.)
I’m just trying to get paid.
(And, you need to understand the long-term trends in order to keep getting paid.)
The SONAR chart below is different. It is not outbound tender volumes compared with outbound tender rejections.
The chart is comparing the number of load tenders accepted by contract carriers to the number of loads rejected by contract carriers.
This is an important comparison to understand and is also a bit tricky.
The spot market for truckloads exists due to many reasons but for this exercise let us simplify it to irregular routes and volumes that are rejected or not hauled by contracted carriers. These are the loads that fall out of shipper routing guides.
Load tenders that fall out of the routing guide hit the spot market. Maybe the carrier does not have the capacity right now, or maybe it is being paid more to do something else.
Regardless, optionality has come into play and the demand for contract capacity has exceeded the availability or willingness of the carriers to accept that volume; therefore it spills into the spot market.
Think of contracted capacity as a glass. The SONAR chart above is the visual of that glass.
Load tender volumes represent the water being poured into the glass and contracted carrier capacity is the glass.
When the tendered loads exceed the capacity it spills over the sides onto the table. The table is spot market capacity.
Outbound tender rejections measure the volume of spillage. Uhmm…for this purpose we’ll let that slide.
The white horizontal line at the 15779.06 mark is a rough estimate of the contracted load volumes that the glass or carrier capacity can hold.
Yes, this is higher than past years as capacity has increased, but that doesn’t help matters for the owner-operator as the increase is contracted capacity.
If you notice, when volumes exceed this number the tender rejections – OTRI increase. This is represented by the green line. This means that more loads are spilling into the spot market as they are rejected by contract capacity.
The bad news is that not only has the table been drying up since the beginning of this year, and the glass is not overflowing at all – and hasn’t been since March.
This means that the contracted capacity is greater than the demand. The loads tendered are exceeded by the contract capacity’s willingness and ability to accept those loads.
Optionality is dwindling.
Rejections are falling even as the volume of accepted loads decreases.
Spot rates continue to decline due to downward pressure.
Contracts will follow if the trend runs true.
Stay informed. Learn.
Read more articles from Michael “The Dude” Vincent
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