Chart of the week: Contract Cargo Accepted Volume Index, Outbound Tender Volume Index – USA SONAR: CLAV.USA, OTRI.USA
Carriers are accepting the same cargo volumes as in April 2023, close to the theoretical floor of the recent recessionary period in the cargo market. Rejection rates (the rate at which carriers reject freight coverage requests from contracted carriers) are more than double what they were at the time. This is further evidence that a significant amount of supply has left and continues to leave the domestic truck market.
The Contractual Cargo Accepted Volume (CLAV) ratio is a measure of accepted cargo offers from the shipper to the carrier. It differs from SONAR’s Outbound Tender Volume Index (OTVI) in that it does not count bids that carriers rejected. More rejections mean it’s harder to get truckload capacity. By comparing the Outbound Tender Rejection Index (OTRI) to the CLAV, we can approximate how balanced the supply and demand curve is in the truckload market by looking at periods of similar accepted volumes and comparing rejection rates in those moments.
In May 2023, CLAV was worth 13,951, while OTRI was 2.92%; basically, carriers automatically accepted loads without discrimination. Last Thursday, the CLAV stood at 13,910 while the OTRI reached 6.48%. While not all loads are equal, average haul lengths were also similar between the two periods. Seasonality is a factor, but trends are the main indicator.
Accepted volumes trended downward from early September through November before stabilizing. Rejection rates have increased since early October, rising from around 4.5% on September 29 to 6.5% on December 12.
This increase is greater than the typical seasonal peak driven by reduced capacity during the holidays. The only year in which rejection rates increased consistently during this period was 2019. Every two years outside of 2019 and the current year, rejection rates remain stable or decline heading into the Thanksgiving period.
If we analyze the historical OTRI figures for the last seven years, most of them show a downward trend. This aligns with a small drop in demand stemming from the Labor Day weekend surge.
This year’s OTRI is still missing the Thanksgiving week peak, which has been muted for the past three years. But the upward trend in rejections is a new development, especially considering that it does not appear to be driven by a demand-side event.
Comparing the OTVI (total offers) and CLAV (accepted offers) over the past year, the gap is constantly growing. This is the result of lower availability of road transport capacity. The gap is represented by the OTRI. The interesting thing is that both CLAV and OTVI are falling. Most people familiar with transportation markets would think that a transitioning market would have a flat to slow growing CLAV and a rising OTVI, which is what happened in 2020, as seen below.