Chart of the Week: Outbound Tender Volume Index, Loaded Outbound Rail Container Volume Index, Inbound Ocean TEUs Index – USA SONAR: OTVI.USA, ORAILL.USA, IOTI.USA
Truckload tender volumes (OTVI) remain the weakest of the three major demand-side indicators in SONAR. In contrast, loaded intermodal containers moving by rail (ORAILL) are averaging more than a 7% year-over-year increase, and container import bookings (IOTI) are showing similar gains after clearing the Lunar New Year period.
The takeaway: The freight market remains in a holding pattern, while financial markets struggle to interpret what seems to be an ongoing trade policy standoff.
At the time of writing – a caveat now necessary in any discussion involving tariffs due to the pace of change – tariffs on Chinese goods have climbed to 125%, placing immense pressure on businesses that source products from China.
China remains the dominant origin for containerized goods entering the U.S. by sea. Many companies began diversifying their supply chains away from China following the COVID pandemic, which exposed the risks of overdependence on Chinese manufacturing. Some of this shift began during the Trump administration as trade tensions intensified.
This most recent wave of tariffs and negotiations has left many supply chain managers in limbo. Many had expected more time and clearer guidance to move production to countries like Mexico and Vietnam. Instead, a series of blanket tariffs – including early measures targeting North American trade partners – has left them uncertain about their next steps.
Meanwhile, truckload demand has dropped nearly 10% over the past year, as shippers increasingly turn to intermodal solutions for domestic transportation.
Intermodal demand is thriving (from a volume perspective, not pricing) largely due to increased lead times on orders. Shippers are “pulling forward” inventory well ahead of fulfillment needs, reducing the urgency that typically accompanies just-in-time inventory management models.
During the pandemic, transportation providers were overwhelmed with freight that needed to move immediately. Today, they’re seeing a glut of freight that might need to move in a few weeks – or longer.
While intermodal is typically a lower-cost option, it also benefits in this environment from its inherently slower pace, owing to multiple transloading points. Shippers are using this to their advantage, effectively treating intermodal as a form of “rolling storage” to manage inventory.
However, the escalation of tariffs with China suggests that this pull-forward strategy may soon come to an end – at least with that country. If that happens, import demand could fall back to levels more in line with actual consumption.
