Shipper requests for truckload capacity in Laredo, Texas, are being rejected at the highest rates since the pandemic era. The Outbound Tender Reject Index (OTRI), which measures the percentage of declined truckload capacity requests by carriers, shows that rejection rates surged from an average of 3.8% in October through mid-December to over 6% just before Christmas. These rates have remained unexpectedly high.
Factors Beyond Demand
While demand for truckload capacity has been approximately 10% higher year after year since October, the spike in rejection rates around the holidays suggests that demand alone does not explain the market tightening. One potential driver is the uncertainty surrounding U.S. trade policy. Over the past month, President Donald Trump threatened, implemented, and then paused tariffs on Mexico, the U.S.’s largest trading partner by value. This uncertainty likely spurred shippers to move goods ahead of potential cost increases, contributing to the sustained growth in cross-border freight demand.
Laredo’s Market Dynamics
From an outbound freight perspective, Laredo is a relatively small market, ranking 48th out of 135 U.S. freight markets with just 0.7% of total outbound freight volume. Its location, a day’s drive from Dallas and just over a half-day from Houston, makes it relatively remote. Notably, Laredo handles significantly more freight moving out of the region rather than originating there, a trend that has intensified over the past year. This outbound focus strains carrier networks, leading to supply chain inefficiencies.
Pricing and Repositioning Costs
In major outbound-heavy markets like Los Angeles, pricing accounts for the additional cost of repositioning empty trucks, also known as “deadheading.” Shippers pay beyond the direct transport cost, covering the expenses carriers incur when relocating equipment. However, Laredo’s cost of serving has risen even as broader freight rates decline. Carriers have struggled to pass along these repositioning costs, reducing their incentive to prioritize Laredo-bound freight.
Increased Rates
Contract rates in key lanes, such as Laredo to Dallas, have increased 13% year over year, according to SONAR’s invoice data, while spot rates in this lane have risen 8%. Despite these increases, they have not been sufficient to keep enough carriers in the market to prevent rising rejection rates.
The surge in truckload rejection rates in Laredo indicates a tightening market with limited available capacity. Factors such as trade policy uncertainty and the unique market dynamics of Laredo contribute to this trend, highlighting the challenges carriers face in managing repositioning costs and maintaining market presence.
Source: Yahoo News
