Tender Rejections Jump 14%: Labor Day Tightens Freight

Tender rejections have risen above 14%, signaling increased strain on the freight market during Labor Day. This SONAR update from FreightWaves highlights why rejection rates are accelerating faster than in the past three years, the implications for capacity, and how even slight demand fluctuations can still impact the market. The national Tender Rejection Index recently crossed the 14% threshold for the first time since early August, a trend outpacing the increases observed during the same holiday period over the past three years, according to data reviewed by FreightWaves.

Industry expert Zach Strickland warns against interpreting the stabilization period as the end of the cycle. He emphasizes that stabilizing at a high level does not mean the cycle is over. In fact, he attributes the July and August demand softness more to modal conversion rather than a fundamental weakening in freight volumes. Strickland notes that while capacity hasn't expanded significantly, it has ceased contracting at a rapid pace, a process that typically takes six to seven months to unfold.

Spot rates for different modes exhibit varying trends. Flatbed rates remain high, supported by data center construction activity, but overall, they are gradually declining. Refrigerated rates stay steady due to seasonal produce demand and the absence of intermodal competition affecting dry van rates. Van spot rates, however, are the most volatile, fluctuating unpredictably, similar to conditions seen during the COVID era.

Tender volumes decreased as shippers front-loaded orders before holiday vacations. Despite hurricanes being a potential disruptor, the current El Niño pattern has kept storm activity in check. Strickland concludes that tight markets heighten volatility, making any incremental demand rise or supply disruption result in significant rate moves. He anticipates continued volatility in van spot rates through the end of the year.