Truck rejection rates skyrocket in the largest US-Mexico transnational market
This week’s chart: Outbound Bid Rejection Index, Outbound Bid Volume Index – Laredo Sonar: otri.lrd, otvi.lrd
The request for truck load capacity shippers has been denied at the highest rate since the pandemic era in Laredo, Texas (the largest cross-border market in the US).
Outbound bid rejection index (On the other) Measures the percentage of truck load capacity requirements that reduce carriers. Because rejecting loads is generally undesirable for carriers, an increase in rejection rates indicates a tightening market where the capacity available is limited.
Laredo’s load rejection rate averaged around 3.8% from October to mid-December, but rose unexpectedly, surged by more than 6% just before Christmas.
Since October, demand has risen by about 10% year-on-year, but the rejection rate has only skyrocketed on holidays. This suggests that demand alone may not explain market tightening.
One potential driver is the uncertainty surrounding US trade policy. For the past month, President Donald Trump threatened and enforced tariffs in Mexico, the largest US trading partner, and has since suspended it. This uncertainty was expected before the election. This may explain the sustained growth of cross-border cargo demand as shippers rush to move goods ahead of potential increases in costs. However, the increased rejection rate suggests additional factors during play.
From an outbound cargo perspective, Laredo is a relatively small market. It ranks 48th out of 135 US freight markets, only 0.7% of total freight freight. The place – a day by car from Dallas and over a half day from Houston – is relatively far away.
Most notably, Laredo handles far more cargo travelling from the region rather than coming from it. When the freight market focuses in large quantities, carrier networks can become tense and lead to supply chain inefficiencies.
In a market with a large number of major outbounds, like Los Angeles, they price an additional cost (also known as “deadheads”) for relocating empty trucks. The shipper pays more than the direct shipping cost and covers the cost carriers that arise when relocating equipment.
However, Laredo’s service costs have risen even as wider freight rates fall. Airlines are struggling to pass on these relocation costs, reducing the incentive to prioritize Laredo-bound cargo.
Sonar’s invoice data shows that contract rates for major lanes such as Laredo to Dallas have increased by 13% year-on-year, while spot rates for this lane have risen by 8%. However, these increases have not maintained sufficient careers in the market to prevent a rise in rejection rates.