While experts don’t believe the freight market will jump dramatically early this year, all signs indicate that we’ve reached the bottom of the recession and that the market will see a gradual upturn this year.
In the beginning of January, the Outbound Tender Reject Index (OTRI) hit the highest levels since 2022. The OTRI, a statistic that simply measures the number of offered loads that carriers are declining, is considered one of the most accurate indicators of the freight market. For example, in January of 2024, the reject index hit around 1.5%. Carriers were only rejecting that much of what they were offered. This month, it reached over 10%, a dramatic increase. In addition to this, spot rates have increased an additional 10% since 2023. There are a number of factors contributing to this recovery.
- Warehouse inventories are finally decreasing from the pandemic-era glut.
- Capacity is leaving the market. Carriers popped up all over the place in 2020-2021 to cover the increase in freight during the pandemic. But due to the unusually long freight recession, many carriers without financial resiliency having exited the market. The fewer carriers competing for freight, the more freight there is for those still in the market.
- Economic optimism. The expected policies of the incoming administration have created optimism in the markets and increased consumer confidence and spending.
- Due to a number of economic and geopolitical concerns, ocean container rates have been steadily increasing. These issues involve uncertainty about potential new tariffs, rerouting vessels to stay out of the Red Sea where many ships have been attacked by terrorists, and concerns of potential port worker strikes. All this volatility has driven rates upward. Long-term ocean container rates are generally negotiated at the beginning of the year, so rates will stabilize, but only time will tell in which direction they will go.
It’s still very early in the year to have a good idea how much improvement will happen in 2025, but analysts expect slow gains of possibly 3% in contract freight in 2025 with gains picking up speed after this year. While they are not as optimistic as before about a robust recovery, they are confident of these smaller increases. Marvin Keller has been through worse, like during the Great Recession of 2008, and is much more resilient now. Rates are already going up this year and we’re gaining new customers. Things are looking up for the freight market and Marvin Keller in 2025.
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