Seasonality Drives Higher Rejections and Rates Ahead of July Fourth

Seasonality Pushes Rejections and Rates Higher Ahead of the Fourth

Carriers are gaining pricing leverage as the trucking market heads into the Independence Day holiday, with seasonal driver availability adding pressure to an already tight freight environment.

The DHL Supply Chain Pricing Power Index rose to 75 for carriers this week, up from 70 last week. The index’s three-month outlook remains at 70, also favoring carriers. The measure uses data from FreightWaves’ SONAR platform to assess the balance of negotiating power between shippers and carriers.

The latest increase reflects a combination of strong freight volumes, rising tender rejections and historically elevated rates. However, the data also indicates that some of the recent increase in tender activity is being driven by holiday-related capacity constraints rather than a sudden acceleration in underlying demand.

Holiday timing tightens available capacity

The Outbound Tender Volume Index stood at 15,980, a level higher than nearly any point during the previous 12 months, with the exception of the period immediately before Thanksgiving and Black Friday in 2020.

OTVI measures electronic freight tenders, including loads that carriers reject. That makes the accepted tender volume index a useful companion measure because it accounts for changes in rejection activity. After that adjustment, accepted outbound tender volume was only 2.2% below its 2020 peak in November.

Volumes increased through the second half of May and into June, then moved higher again ahead of Independence Day. At the same time, tender rejections began rising after declining steadily from mid-March through mid-May.

That pattern is typical before a major national holiday. Some drivers choose loads that position them closer to home, while others take time off, reducing the amount of equipment available to cover freight. As a result, the latest increase in the volume index is being driven in part by a higher rejection rate rather than by a comparable increase in accepted freight.

Rejections return above 25%

The national Outbound Tender Reject Index moved above 25% for the first time in June. Van rejections increased from roughly 23% to 26% over the past two weeks, closely tracking the broader market because dry van freight represents the largest share of electronic tenders.

Refrigerated rejection rates also remain high at about 38%, although they are well below the levels recorded earlier in the year, when reefer carriers were rejecting approximately half of electronically tendered loads. Reefer volumes have declined substantially since their February peak, falling 25% from the all-time high and another 10.5% since Memorial Day.

The contrast between van and reefer freight is important for drivers. Current market tightness is being led primarily by dry van activity, while reefer conditions have eased from the extreme levels seen during the winter and early spring. Seasonal grocery demand and summer activity could affect reefer volumes, but the available data shows that van freight is currently providing the stronger support for overall market pricing.

Spot rates remain elevated

Spot rates have moderated from their earlier high but remain historically strong. The national Truckstop.com dry van average, including fuel, declined from $3.21 per mile at the beginning of June to $3.11 per mile. Over the same period, FreightWaves’ van contract rate increased from $2.50 to $2.59 per mile, excluding fuel.

The gap between spot and contract pricing has narrowed, but both markets remain elevated. With tender rejections rising ahead of the holiday, carriers continue to have alternatives when deciding which freight to accept. That gives them more leverage in the spot market, particularly in areas where inbound freight has created equipment imbalances.

Capacity remains especially tight around major import gateways. Ontario, California; Savannah, Georgia; and Atlanta each recorded a carrier capacity trend score of 100 in the SONAR data. Strong import activity is also affecting Houston, New Orleans and Miami, while congestion along the California coast continues to delay the movement of containers into the domestic freight network.

Imports and low inventories support demand

Import activity remains one of the primary sources of freight demand. Container traffic continues to flow through West Coast ports, while several Gulf Coast and East Coast gateways are also handling strong volumes.

Retail and manufacturing conditions are adding to the pressure. Consumer spending has moderated in some pandemic-related categories, but overall demand remains strong. Real inventories are only 3% above pre-pandemic levels, while sales growth has outpaced inventory growth. That has left the inventory-to-sales ratio near historic lows and created a need to keep replenishing warehouses and distribution centers.

Manufacturing also remains in expansionary territory. New orders, production, imports, exports and employment are growing, although delivery times are lengthening, backlogs are increasing and inventories remain low. Those conditions continue to generate freight even as transportation delays and shortages affect manufacturers.

The current outlook therefore reflects two forces working together: sustained freight demand and a temporary reduction in available trucking capacity around the Fourth of July. Tender rejections may ease after the holiday as drivers return to regular schedules, but the index remains firmly in carrier-favorable territory because demand is still running at historically high levels and capacity has not expanded enough to absorb it.