The Urethane Blog
February 12, 2021
Trucking contract rates up 12% year-over-year
Zach Strickland, FW Market Expert & Market Analyst Follow on Twitter Saturday, February 6, 20211 1,911 3 minutes read
Chart of the Week: Van Contract Base Rate per Mile, Van Outbound Tender Rejection Index, Truckstop.com 7-day rate per mile Van– USA SONAR: VCRPMF.USA, VOTRI.USA, TSTOPVRPM.USA
Shippers spent 12% more per mile for dry van truckloads on average through most of the fourth quarter of 2020 than they did in 2019. That is according to FreightWaves’ newest dataset that measures trends in long-term rates (not spot rates) between shippers and van carriers, Van Contract Base Rate Rate per Mile (VCRPMF).
Trucking costs have been trending higher since late June, following a dramatic increase in the Van Outbound Tender Reject Index (VOTRI). The tender rejection indices measure the rate at which carriers reject shippers’ requests for capacity. Higher rejection rates indicate less capacity, which leads to shippers moving down their carrier lists — also known as route guides — looking for coverage. As they move down the list, rates tend to be higher and service deteriorates.
A large portion of these rate increases represented in the chart are the result of shippers moving down their route guide searching for coverage. Many of these loads do not appear on the spot market, which has long been the main barometer for measuring truckload rate fluctuations. Most loads that end up on the spot market are last resorts for larger companies that rely heavily on contracted agreements.
Spot rates, represented by Truckstop.com’s seven-day average in the chart, move wildly compared to the long-term contract rates and represent, by many estimates, less than 15% of the overall for-hire van truckload market in an average year. It can be difficult to discern how representative spot rates can be of the much larger underlying contracted market.
A wave of consumer demand fueled by an unprecedented stimulus package and a surprising economic recovery for durable goods strained trucking networks in the second half of 2020. Many companies reportedly went to carriers with self-implemented rate increases in attempts to lock down more capacity. This is not a standard practice as shippers typically hold the upper hand in negotiating with carriers due to the highly competitive trucking environment. Carriers bid for shippers’ freight in most cases, not the other way around.
The mechanic shippers use to establish long-term rate agreements, known as contract rates inside the industry, is called a bid or request for pricing (RFP). Companies send their bids out to carriers asking for them to offer their best price for each lane. Most of this activity occurs between Thanksgiving and March as budgets are being established.
Knowing many new contracts have not been implemented, it is safe to assume a large portion of the recent implied rate increase will stick. Tender rejection rates remain over 20% and spot rates are still well above contract by a large amount in what is typically considered the off-season.
Increasing contract rates should help encourage increasing carrier acceptances and lower spot rates, but there are still plenty of potential disrupting factors available.
Not out of the woods yet
On the demand side, the industrial sector is slowly making a comeback, which was largely absent from the volumes in 2020. A massive restocking event is taking place with shippers having sourcing issues thanks to COVID limiting production.
The maritime shipping industry is more out of balance than the domestic trucking space as container shortages and record shipping rates are persisting through the normally slow Chinese New Year holiday in Asia, where most of the U.S. consumer products are made. The result is a very uneven flow of freight into the country, which is difficult for carriers to manage.
The supply side of the equation is not as healthy as it was in 2018, when carriers placed record orders of equipment and quickly oversupplied the market in 2019. Driver schools remain half full and the recently implemented Drug and Alcohol Clearinghouse is doing its job by limiting the available pool of drivers who have drug and/or alcohol violations. Many who fail do not return.
The nor’easter that hit the East Coast this week pushed national rejections higher, illustrating just how fragile carrier networks are in the slower part of the year. There may be room to grow yet.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on 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 front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.
The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.
To request a SONAR demo, click here.
February 12, 2021
Trucking contract rates up 12% year-over-year
Zach Strickland, FW Market Expert & Market Analyst Follow on Twitter Saturday, February 6, 20211 1,911 3 minutes read
Chart of the Week: Van Contract Base Rate per Mile, Van Outbound Tender Rejection Index, Truckstop.com 7-day rate per mile Van– USA SONAR: VCRPMF.USA, VOTRI.USA, TSTOPVRPM.USA
Shippers spent 12% more per mile for dry van truckloads on average through most of the fourth quarter of 2020 than they did in 2019. That is according to FreightWaves’ newest dataset that measures trends in long-term rates (not spot rates) between shippers and van carriers, Van Contract Base Rate Rate per Mile (VCRPMF).
Trucking costs have been trending higher since late June, following a dramatic increase in the Van Outbound Tender Reject Index (VOTRI). The tender rejection indices measure the rate at which carriers reject shippers’ requests for capacity. Higher rejection rates indicate less capacity, which leads to shippers moving down their carrier lists — also known as route guides — looking for coverage. As they move down the list, rates tend to be higher and service deteriorates.
A large portion of these rate increases represented in the chart are the result of shippers moving down their route guide searching for coverage. Many of these loads do not appear on the spot market, which has long been the main barometer for measuring truckload rate fluctuations. Most loads that end up on the spot market are last resorts for larger companies that rely heavily on contracted agreements.
Spot rates, represented by Truckstop.com’s seven-day average in the chart, move wildly compared to the long-term contract rates and represent, by many estimates, less than 15% of the overall for-hire van truckload market in an average year. It can be difficult to discern how representative spot rates can be of the much larger underlying contracted market.
A wave of consumer demand fueled by an unprecedented stimulus package and a surprising economic recovery for durable goods strained trucking networks in the second half of 2020. Many companies reportedly went to carriers with self-implemented rate increases in attempts to lock down more capacity. This is not a standard practice as shippers typically hold the upper hand in negotiating with carriers due to the highly competitive trucking environment. Carriers bid for shippers’ freight in most cases, not the other way around.
The mechanic shippers use to establish long-term rate agreements, known as contract rates inside the industry, is called a bid or request for pricing (RFP). Companies send their bids out to carriers asking for them to offer their best price for each lane. Most of this activity occurs between Thanksgiving and March as budgets are being established.
Knowing many new contracts have not been implemented, it is safe to assume a large portion of the recent implied rate increase will stick. Tender rejection rates remain over 20% and spot rates are still well above contract by a large amount in what is typically considered the off-season.
Increasing contract rates should help encourage increasing carrier acceptances and lower spot rates, but there are still plenty of potential disrupting factors available.
Not out of the woods yet
On the demand side, the industrial sector is slowly making a comeback, which was largely absent from the volumes in 2020. A massive restocking event is taking place with shippers having sourcing issues thanks to COVID limiting production.
The maritime shipping industry is more out of balance than the domestic trucking space as container shortages and record shipping rates are persisting through the normally slow Chinese New Year holiday in Asia, where most of the U.S. consumer products are made. The result is a very uneven flow of freight into the country, which is difficult for carriers to manage.
The supply side of the equation is not as healthy as it was in 2018, when carriers placed record orders of equipment and quickly oversupplied the market in 2019. Driver schools remain half full and the recently implemented Drug and Alcohol Clearinghouse is doing its job by limiting the available pool of drivers who have drug and/or alcohol violations. Many who fail do not return.
The nor’easter that hit the East Coast this week pushed national rejections higher, illustrating just how fragile carrier networks are in the slower part of the year. There may be room to grow yet.
About the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on 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 front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.
SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.
The FreightWaves data science and product teams are releasing new data sets each week and enhancing the client experience.
To request a SONAR demo, click here.
February 12, 2021
February 12, 2021
Subject: Lyondell Chemical Company; Propylene Glycol Price Increase
Dear Valued Customer,
Effective March 1, 2021 or as contracts allow, Lyondell Chemical Company (“Lyondell”) is increasing off list prices for all grades of Propylene Glycol in North America and South America per the following:
Propylene Glycol Industrial Grade (PGI) $0.20/lb
Propylene Glycol USP/EP Grade (PG USP/EP) $0.20/lb
Di-Propylene Glycol Industrial Grade (DPGI) $0.22/lb
Di-Propylene Glycol Fragrance Grade (DPGF) $0.22/lb
Tri-Propylene Glycol (TPG) $0.24/lb
Tri-Propylene Glycol Acrylate Grade (TPGA) $0.24/lb
This price increase is in addition to the previous price increase of $0.04/lb for all Propylene Glycol grades, effective February 15, 2021, announced by Lyondell.
Our acceptance of orders submitted prior to the increase date will be subject to our ability to supply. We appreciate the confidence you have placed in us as a supplier, and we look forward to our continuing business relationship. As always, your account manager is available to work
with you or answer any questions you may have.
February 12, 2021
February 12, 2021
Subject: Lyondell Chemical Company; Propylene Glycol Price Increase
Dear Valued Customer,
Effective March 1, 2021 or as contracts allow, Lyondell Chemical Company (“Lyondell”) is increasing off list prices for all grades of Propylene Glycol in North America and South America per the following:
Propylene Glycol Industrial Grade (PGI) $0.20/lb
Propylene Glycol USP/EP Grade (PG USP/EP) $0.20/lb
Di-Propylene Glycol Industrial Grade (DPGI) $0.22/lb
Di-Propylene Glycol Fragrance Grade (DPGF) $0.22/lb
Tri-Propylene Glycol (TPG) $0.24/lb
Tri-Propylene Glycol Acrylate Grade (TPGA) $0.24/lb
This price increase is in addition to the previous price increase of $0.04/lb for all Propylene Glycol grades, effective February 15, 2021, announced by Lyondell.
Our acceptance of orders submitted prior to the increase date will be subject to our ability to supply. We appreciate the confidence you have placed in us as a supplier, and we look forward to our continuing business relationship. As always, your account manager is available to work
with you or answer any questions you may have.
February 12, 2021
Why Mattress And Furniture Retailers Made Presidents’ Day A Big Day
Presidential Level Savings: Why Mattress And Furniture Retailers Made Presidents’ Day A Big Day
By John ShumwayFebruary 11, 2021 at 7:22 am
PITTSBURGH (KDKA) – The coming weekend is big, really big, king-size big, queen size, double size big, and twin size,
“IT’S THE PRESIDENT’S DAY MATTRESS SALE WEEKEND!!”
Say what?
Come on you have to have wondered what do presidents have to do with mattresses? (Other than you need a lot of dead presidents, and a Ben Franklin or two, to buy a new mattress.)
Well, it turns out the industry has a good explanation according to Robert Levin, of Levin Furniture.
“Years ago, August and February, were furniture months,” he explained. “For some reason, Presidents’ Day has become the hottest most important time to buy a mattress. The vendors are giving the biggest discounts, the retailers are promoting like crazy.”
The industry-focused on the slowest time of the year to give a spark to sales and Levin says they are offering some high-tech Apple incentives.
“Home Pod, an Apple 4K TV, the Apple Watch, and Apple earbuds with the charging case,” he said.
I guess you could argue you can use all those things in bed…makes more sense than a bank handing out toasters.
Levin says despite a potentially obvious connection, there is no relationship between President’s Day sales and Valentine’s Day.
“Well, that might be in the eye of the mattress beholder,” he added with a nod.
Mattresses are not exactly like the need to buy groceries, I mean how often do you need a new mattress?
“About every seven to eight years,” says Dr. Matt Flanagan who practices sports medicine and is a primary care doctor with Allegheny Health Network out of Canonsburg.
Dr. Flanagan says there is a direct connection between your mattress and your health.
“Overall sleep health is very critical to one’s overall health when it comes down to it,” Dr. Flanagan said.
So he says if you are sleeping on a lousy mattress…“there’s going to be multiple health repercussions from that. It can delay you in recovering from physical injury. It can lead to physical injury, leading to chronic neck and back problems even lead to chronic headaches and migraines.”
Firm or soft, that’s up to you but when your mattress is no longer recovering from the dent you make overnight it might be an indication for a change.
As for flipping your mattress…
“Probably 95% of the mattresses sold out in the United States are no flip mattresses, so you don’t need to do it,” Levin said.
If you have an older mattress rotating and flipping your mattress every six months may help.
By the way, the pandemic has been good for the furniture industry.
Levin says people aren’t traveling so they have money to spend on the homes where they have been forced to spend a lot of time.
“We felt that the pandemic would be a period where we would go into, you know some kind of recession and it would reduce demand,” he said.
Instead, the opposite has happened.
However, he says furniture manufacturers have been impacted so customers are having to wait longer for their deliveries.
Oh, and if you miss the President’s Day sales, don’t worry because before you know it Levin says there will be…
“Memorial Day, the Fourth of July, Labor Day, Black Friday is a big day, and the New Year’s event is a big event.”
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