Truck Stiffness Persists Until Spring

Chart of the week: SONAR Truck Load Rejection Index, National Truck Load Index – USA SONAR: STRI.USA, NTI.USA

Domestic tender rejection rates (STRI) have only declined slightly since peaking in early February, while dry van spot rates are rising again as fuel prices rise. The bottom line is that the truck market may be entering the early stages of a prolonged transition period, with additional disruptions likely due to seasonal factors and new regulatory pressures.

Comprehension tender rejections It is key to interpreting the truck market. While spot rates tend to correlate with rejection rates over time, they are heavily influenced by sentiment and the transactional (spot) market, which accounts for approximately 15% to 30% of total volume. Like financial markets, it involves a significant amount of price discovery.

However, bid rejections are not subject to price determination. They are simple electronic responses that indicate whether carriers have alternative uses for their capacity. Unlike many 3PLs, which dominate the spot market, operators prioritize utilization over margin expansion. When a carrier rejects a freight tender, it usually means that it lacks available capacity in the area or that it has a more profitable opportunity elsewhere, often both. This makes tender rejections a stronger and more objective signal, as they reflect operational decisions rather than market sentiment.

Weather can be a major transportation disruptor and certainly contributed to the high rejection rates seen earlier this year. However, these events are usually short-lived. It’s now been two months since Winter Storm Fern, and both rejection and spot rates have only declined marginally from their early February highs.

SONAR’s Truck Load Rejection Index (STRI) peaked at 14.27% on February 5 and has only fallen to 13.35% at its lowest point as of March 18. Over the past two years, winter weather events have had a more moderate impact, with much faster recovery periods.

Last year, rejection rates peaked at 7.81% on January 15 following several winter storms in the southern and central US, before returning to trend in early February. In 2024, a more intense weather event raised rejection rates to just 5.9% in late January, with a return to trend in late February.

This year’s STRI pattern looks very different. This is more like the prolonged, elevated tightening seen in 2021 during the pandemic, albeit at a lower level.

That said, the underlying market dynamics differ significantly. The current environment lacks the strong demand that defined 2021, which was strongly driven by import volumes and port activity. At that time, transcontinental shipping was increasing due to severe inventory shortages.

The current market is more focused on the Midwest, and shippers are increasingly converting long-haul freight transportation to intermodal transportation. One similarity, however, is the presence of a major weather event in February, comparable to the 2021 Texas freeze, which temporarily limited capacity.

Unlike the pandemic period, which was largely demand-driven from a freight transportation perspective, the current market appears to be shaped by a multi-year contraction in truck loading capacity. Weak operating economics have forced many operators out of the market in recent years, and increased regulatory pressure has accelerated that trend more recently.

Data on the full impact of factors such as ELP enforcement, non-domiciled CDLs, ELD compliance, and questionable CDL issuance are limited. However, some industry estimates suggest the cumulative effect could amount to several hundred thousand drivers.

The recent rise in spot and rejection rates has so far come with minimal seasonal support. Produce season is approaching and has the potential to significantly disrupt transportation markets. Even with limited volumes, rates have already started to rise.

Roadcheck Week has also become a major annual disruptor, often pushing rejection rates off their lows and helping to kick off the summer shipping season.

Meanwhile, import volumes have been weak both seasonally and relative to the past two years. A rebound or sudden increase in demand could add more bullish pressure.

Dalilah’s Law may ultimately be the biggest wild card, as it has the potential to eliminate a significant amount of truck loading capacity in a short period.

With the market already in a relatively tight position, there is little evidence to suggest that conditions will ease significantly or sustainably in the coming months.

The FreightWaves Chart of the Week is a selection of SONAR charts that provide interesting data to describe the state of the freight markets. One chart is chosen from thousands of potential charts in SONAR to help participants visualize the freight market in real time. Each week, a market expert will post a chart, along with commentary, live on the home page. After that, the week’s chart will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presents the data in graphs and maps, and provides commentary on what transportation market experts want to know about the industry in real time.

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