Redwood Report: Market Intel Week of November 27, 2023

Just as we’ve been predicting since early October, capacity has been crushed this week as the US freight industry resumed activity with its assets highly dislocated following the Thanksgiving holiday. As logistics providers struggled to find capacity, carriers seized this opportunity to raise rates, particularly out of busy outbound markets. How big is the impact? In major markets, the load-to-truck ratio more than doubled. We expect to see elevated rates from now through the end of 2023, a trend that’s held true since 2015.

Exacerbating this trend is the continued exit of carriers from the US market, which is only accelerating. The result will be a volatile spot market, especially in the northern US, in late December and early January. Shippers will need to explore new carrier options and extend their networks as capacity tightens.

In looking back at national trends for this week, we see a general squeeze across the board. Typically, the Monday after Thanksgiving represents one of the largest volume pushes of any day of the year, based on DAT postings, and this year was no exception. End-of-month market pressures also drove a volatile spot market. Look for things to cool significantly next week as seasonality sets in and volumes settle down.

What lies ahead for the rest of 2023 — and early 2024? Shoppers are showing strong early holiday spending, spurred by large discounts from retailers. Expect inventory levels to drop, which will necessitate restocks, bigger freight movements and higher rates. There are still unknowns, however, as headlines focus on the possibility of both an economic recession and a gradual decline in interest rates. We will be monitoring consumer confidence closely, and your business should be as well.

Read on to learn more, including a closer look at regional dynamics this week.

Watch This Week's Redwood Rundown

Looking for an expert perspective on the US logistics industry? Join Christopher Thornycroft, Redwood’s EVP of Procurement, for the weekly Redwood Rundown. In just a few minutes, you can learn more about the news, events and trends that are sure to impact your business:

The Post-Thanksgiving Crunch is Here

The tightening of the US freight market is only increasing with the continued removal of capacity. Carriers are leaving at an accelerated pace, with the market losing 1,836 net carrier authorities in the last two weeks. The data for larger carriers lags by about two months. But, if the pace of exits mirrors what we’re seeing for enterprise-level capacity over the last six weeks, we should see a volatile spot market, particularly in the northern half of the country, between the window of the Christmas holiday and Orthodox Christmas, celebrated January 7th. Given the downward pressure logistics providers have seen on contract and spot rates, and the struggle for business health — highlighted by the closing of Surge, Convoy and other brokerages — continued tightening will see shippers traveling further down their waterfalls and exploring new carrier options.

Meanwhile, Capacity Continues to Exit

The tightening of the US freight market is only increasing with the continued removal of capacity. Carriers are leaving at an accelerated pace, with the market losing 1,836 net carrier authorities in the last two weeks. The data for larger carriers lags by about two months. But, if the pace of exits mirrors what we’re seeing for enterprise-level capacity over the last six weeks, we should see a volatile spot market, particularly in the northern half of the country, between the window of the Christmas holiday and Orthodox Christmas, celebrated January 7th. Given the downward pressure logistics providers have seen on contract and spot rates, and the struggle for business health — highlighted by the closing of Surge, Convoy and other brokerages — continued tightening will see shippers traveling further down their waterfalls and exploring new carrier options.

Market Trends Across the US

The US is seeing a general capacity squeeze this week. As we’ve highlighted before, this was driven by two trends: shippers coming back online from Thanksgiving and looking to push freight out the door before end-of-month, as well as carriers being out-of-position and unable to accept regularly awarded freight. Based on DAT postings, this year is consistent with historic trends: the Monday after Thanksgiving represented one of the largest volume pushes of any day of the year. Tuesday is actually the tightest day, since most trucks will be empty on Monday — but any mid-haul or longer load won’t be empty the following day. At end-of-week, we’re beginning to see a more navigable market, as enterprise-level carriers can accept more contract freight and capacity settles. However, end-of-month (EOM) pressures and the lack of cover for contract freight drove a volatile spot environment this week. In looking at market specifics, Los Angeles (5.3 to 1 on Tuesday) saw import volumes increase heading into last week, creating pressure throughout all neighboring markets as capacity was pulled toward the Inland Empire. Look for things to cool significantly next week as seasonality sets in and volumes settle down throughout the Southwest. The Pacific Northwest is in the midst of its peak season (Portland 7.4 to 1 on Tuesday), particularly for temperature-controlled freight in the western parts of Oregon and Washington. The Midwest is starting to pick back up and will be a carrier market for the next couple months, starting this week. Green Bay (6.1 to 1 on Tuesday), Cedar Rapids (7.5 to 1 on Tuesday), and Minneapolis (3.4 to 1 on Tuesday) are particularly. Over in the Northeast, look for volumes to increase in markets such as Harrisburg, PA (9.3 to 1 on Tuesday), Elizabeth, NJ (4.8 to 1 on Tuesday) and Baltimore, MD (6.1 to 1 on Tuesday) ahead of EOM. Although the Southeast is in the middle of its dead season, it’s seen the same challenges as the rest of the country during the early part of this week, particularly out of Atlanta (4 to 1 on Tuesday). The Midsouth tells the same story, particularly in Memphis (7.7 to 1 on Tuesday). The significant source of freight being pulled from distribution centers is food, driving higher volumes in Arkansas (Little Rock, 5.5 to 1 on Tuesday) and Texas (Houston, 5.8 to 1 and Dallas, 6.8 to 1 on Tuesday).

What’s Ahead? Growing Consumer Confidence Spurs Urgency

There have been some years, such as 2019, that saw these market pressures last throughout the month of December. However, it’s important to note that in 2019 there was a rapid decline in retail inventories against stronger-than- expected consumer spending for the holidays. This led to shorter lead times, creating more urgent freight movements than projected. Will 2023 prove the same? This year, consumer confidence is also up. Shoppers are spending aggressively as retailers offer big discounts. While inventory levels currently appear to be holding up, this holiday push will continue to draw these levels down. The restocking of inventory in early 2024 — against a backdrop of considerably less capacity that was seen in 2022-2023 — will push rates upward. But with recession fears looming — while others hope for interest rate cuts — there is a lot of uncertainty as we look to the new year. Keep watching the Redwood Report for further developments.

Top 3 Charts for the Week

Freight Rates Climb Through the Holiday

The Sonar NTIL hit $1.66 this week , the highest we have seen since July 14th.

Capacity Drops as Carrier Exits Accelerate

The pace of carrier exits has greatly accelerated (1,836 over the previous two weeks), and we now see the fewest carrier authorities since September 2021.

A Nationwide Capacity Squeeze 

Just as we predicted, freight markets were tight across the US following the Thanksgiving holiday.

Get Up to Speed with Weekly Market Intel

Follow the Redwood LinkedIn page to watch Christopher Thornycroft’s insightful Redwood Rundown video every week. You can also read our insights blog to learn about industry trends and gain intel, including the weekly Redwood Report!