Chart of the week: Accepted contract cargo volume index, outbound tender volume index – US SONAR: CLAV.USA, OTRI.USA
Carriers are accepting the same loading volumes as in April 2023, close to the theoretical bottom of the recent freight market recession period. The rejection rate (the rate at which carriers reject requests for cargo coverage from contracted shippers) is more than double what they were at the time. This is further evidence that a significant portion of supply has left and continues to leave the domestic truckload market.
The Contract Load Accepted Volume Index (CLAV) is a measure of accepted cargo quotes from shipper to carrier. It differs from SONARs Volume index of outgoing tenders (OTVI) in the sense that quotes rejected by carriers are not counted. More rejections mean it becomes more difficult to purchase truck capacity. When comparing the Outbound Tender Reject Index (OTRI) The CLAV allows us to determine approximately how balanced the supply and demand curve is in the truckload market by looking at periods of similar accepted volumes and comparing the rejection rates at those times.
In May 2023, the CLAV had a value of 13,951, while the OTRI was 2.92% – in effect, carriers automatically accepted loads without discrimination. Last Thursday, the CLAV stood at 13,910, while the OTRI reached 6.48%. Although not all loads are equal, the average transport lengths between the two periods were also comparable. Seasonality is a factor, but the trends are the key sign.
Accepted volumes showed a downward trend from early September to November, before leveling off. The rejection rate has increased since early October, from about 4.5% on September 29 to 6.5% on December 12.
This increase is larger than the typical seasonal peak caused by a reduction in holiday capacity. The only year where rejection rates steadily increased during this period was 2019. In every other year outside of 2019 and the current year, rejection rates have been flat or declining leading up to the Thanksgiving season.
Looking at the historical OTRI figures over the past seven years, most of them show a downward trend. This corresponds to a slight decrease in demand due to the surge over Labor Day weekend.
Still missing from this year’s OTRI is the Thanksgiving week peak, which has been muted for the past three years. But the upward trend in rejections is a new development, especially since it does not appear to be caused by a demand-side event.
If we compare the OTVI (total tenders) and CLAV (accepted tenders) of the past year, the difference is steadily increasing. This is the result of the reduced availability of truck capacity. The gap is represented by the OTRI. Interestingly, both CLAV and OTVI are declining. Most people familiar with transportation markets would think that a transition market would have a flat to slow growing CLAV and an increasing OTVI, which is what happened in 2020, as seen below.