Adding complexity | Freightonomics

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And welcome back, if you are still joining us from FreightWaves today, this is now Freightonomics.

Malcolm took off on me. So it's going to be Zac and Zac today. We've got Dr. Zac Rogers coming up to talk about the latest LMI.

But first things first, a little bit of an economic release week that's been fairly important to monitor. We've got inflation that's still sticky. And again, very concerning thing, but the free market itself, like the big read on the environment that I've seen thus far, is that a lot of the shipping community has really been hesitant to make long-term decisions, long-term planning. We just had a record month of TEU throughput in the Port of Los Angeles. Stuart Charles wrote about this.

And I think it's a byproduct of our environment. I mean, record September all time, not just September, I should say, but all time record throughput, domestic container volume. So this environment is like none we've ever seen before. And I think that's transitioning or translating very well to what we're seeing in the domestic truckload market. So without further ado, let's get you kicked off with some data, do the thing that we do best and do a quick sonar market update. First things first, let's throw up the S-Tri, Sonar Tender Rejection Index. So this shape, as I've said before, very unusual.

We have seen this double humping thing around Labor Day before, a very small way over the last year. If you look at that yellow line that you're looking at on the screen, we saw a very small muted version of this last year. This has been a year of exaggeration. The big nuance though is the fact that tender rejection rates are flatlining around this 14 percent level since. We normally would see either some deterioration in the tender rejection index, especially as demand wanes. Over the last two years, I would not have expected this as much necessarily, maybe a brief pause going into October. But the fact that we're still holding on and not falling down in a market, that should be, and I think a lot of people are expecting it to stabilize. If you look at the STRI over the last year, not STDI, but STRI over the last year, the hit, thanks for staying with me.

You can draw these imaginary lines starting in February into May, that are downward sliding. And in June into July, a downward sliding trend line. I think a lot of us expected this to happen, but I think we're also getting a little bit of a recovery mechanism. We dropped quicker than we should have, arguably, out of July.

So this stabilization around 14 percent, I almost can reconcile looking at maybe that July trend line that we were looking at is the right trend line, giving us enough time to kind of hold up here for a while, but it's only going to hold up so long before we hit the holiday period. So definitely watching for the holidays as being a still very tight and a still very challenging market. Now we can go to the STBI and look at demand side conditions, which at this point, demand is just not a critical function. We can go to the, there we go. And so this is, it's not a huge component driving freight market volatility to this level. Like we had a little bit of a bump around Labor Day. And now that market is, it's really just not showing us much, if anything. It's a very uninteresting, it's good in the sense that it's still a pretty strong year over year growth. We're right around 6 to 8% year over year. The STBI as we head into what was a pretty slow month for tender volumes in October of 2025 I think a lot of us were thinking, oh, God, here we go again. We're going to have another cycle of economic weakness. It's going to extend the freight market recession. That did not hold up to be true. Demand didn't have to be a component of this market flip, as we've been talking about for the last almost year now. This is a very supply-centric environment that we are now transitioning out of.

But demand, not really messing with things. If we do get demand in the back half of this year, the last quarter around the holidays, which is not necessarily traditionally the case, although looking at that STVI chart, it is possible that we get a big boost around the holidays. Last year was one of those examples, 2024, not so much. I think I would look more at 2024 than 2025 this year, because the shippers have been very, very methodical, very consistent in their ordering imports. That being said, we're still in an environment where they are ordering just enough freight to get by. So I'm thinking, yes, the yellow spike is possible, but I'm still going to lean on that bump in 2024 versus the spike at this point, because I think that they have been much better at managing through things than we've seen thus far. Let's go to the next chart here, looking at the spot rates, NTi, everybody loves to look at the NTi, the average spot rate for drive-in truck loads, still hanging on. And I think a lot of people are still confused on how much fuel is having to do with the NTi and spot rates. Know this, and you've heard me say it before, you cannot pass along your higher input costs if the consumer or the customer slash shipper will not allow it. So as spot rates stay up, is it based on fuel? Yes, a little bit is fuel. You're not going to think about charging higher rates if you don't need to necessarily, but sometimes the market tells you to charge higher rates, because you have five shippers calling you, asking for the same truck, and they have to compete for that capacity. That drives rates higher in a market environment, which is the spot rate environment, which we're in today still, that shippers are still competing against each other for capacity, and that's because the tender rejection index is still 14 percent. That is not good enough compliance for a lot of the shipping community. Now, let's move on to the diesel chart here, and we can pull that one up, because this is probably arguably the most important figure to look at right now. As the conflict in Iran still continues, diesel prices have surged, and it's not just a thing for trucking, but it's a thing economically now, because the price of diesel, if you listen to Dr. Zac Rogers talk about this a month ago, over a month and a half ago, I guess, his students calculated that there were hundreds of billions of dollars removed from the economy based on the price or the rate inflation of diesel, because just about everything that we do touches diesel somewhere. Goods delivery, et cetera, is definitely dependent on this. So this elevation, definitely critical in keeping that CPI high as well as the PPI that came out today that was one of the largest numbers we've seen.