The highlights from Wednesday’s SONAR reports. For more information on SONAR — the fastest freight-forecasting platform in the industry — or to request a demo, click here. Also, be sure to check out the latest SONAR update, TRAC — the freshest spot rate data in the industry.
Lane to watch: Los Angeles to Chicago
Overview: Spot rates and tender rejection rates remain elevated primarily due to lack of capacity at origin.
Highlights:
- The current tender rejection rate in the lane is 20.4%, which remains elevated compared to the 17%-18% tender rejection rate prior to Christmas.
- The dry van spot rate has risen steadily during the past month – primarily due to less available capacity at origin, which is typical for this time of year. The current dry van spot rate is $3.68/mile, including fuel, according to FreightWaves Market Dashboard.
- The latest intermodal spot rate is $4.10/mile, including fuel surcharges, which is too high for spot shippers to consider using rail intermodal in the lane.
What does this mean for you?
Brokers: Raise your rates relative to where they were before a portion of the L.A. capacity left for the holidays. When bidding for capacity, keep in mind not only that the latest dry van spot rate is $3.68/mile, but that $3.82/mile and $3.48/mile represent spot rates in the 67th and 33rd percentiles, respectively. All quotes include fuel surcharges.
Carriers: Seek to haul loads for rates higher than what you would have received in recent weeks given the seasonal tightness in the Los Angeles market. It should be easy for dry van carriers to get reloaded in Chicago given the Van Headhaul Index of 28.5, which indicates that more loads are leaving the Chicago market than entering it.
Shippers: In light of the relatively tight conditions at origin, keep lead times extended to help secure capacity. Other shippers moving long-haul loads (800+ miles) outbound from L.A. have lead times extended to 2.5 days, on average, which is at the high end of the 1.7-2.5 day range of the past year.
Watch: Logistics Update presented by Flexe
Lane to watch: Atlanta to Cleveland
Overview: Tight capacity in each market is placing upward pressure on already elevated rates.
Highlights:
- The rejection rate out of Atlanta increased 250 bps over the past week, while load imbalance in the market continues to increase.
- The rejection rate in Cleveland is currently 28.5%, the highest it has been since early April, after increasing 830 bps over the past week.
- The FreightWaves TRAC van spot rate from Atlanta to Cleveland is $3.16/mi, including fuel surcharge, which is the highest level in a month.
What does this mean for you?
Brokers: Capacity is likely to continue to tighten, leading to increased spot market activity. The tightening in both markets is going to place more upward pressure on spot rates in the coming days. Try and secure capacity around the $3.16/mi level to pad margins ahead of rising spot rates.
Carriers: Both markets have tightened over the past week, placing increased pricing power into carriers’ hands. Take advantage of this pricing power by putting pressure on spot rates. Though Cleveland isn’t traditionally the best market for carriers, recent tightening has made the market much more attractive.
Shippers: Extend lead times in order to secure capacity during the final week of the year. Expect disruptions to carrier networks, increased spot market activity and higher rates throughout the rest of the week.
Lane to watch: Toledo (Ohio) to Dallas
Overview: Tender rejections have jumped 10 bps for a 50% increase in the past two weeks. Tender rejections have reached a 3-month high and spot rates remain elevated.
Highlights:
- Outbound tender rejections in the Toledo to Dallas lane increased 20 bps (or 50%) since December 14.
- The Toledo market as a whole saw weighted tender rejections increase 21.67 bps, putting total outbound tender rejections at 40.82%.
- Spot rates for the Toledo to Dallas lane remain high at $2.87 per mile, a 5 cent per mile decrease from mid-December highs of $2.92 per mile.
What does this mean for you?
Brokers: Increased tender rejections represent the potential for increased spot market activity. Approach any spot quotes with caution, unless booking with a truck in hand or the customer is willing to pay a premium. Always ensure an adequate margin buffer due to lack of capacity during the holidays.
Carriers: Increased tender rejections provide a buffer due to weather and holiday-related service disruptions. Many drivers are currently at home for the holidays and capacity will remain light into 2022. Continue to communicate with customers on contracted or committed lanes regarding availability and tender compliance until fleet availability returns to pre-holiday levels.
Shippers: Consider adjusting rates or start working down the routing guide while communicating priority loads with broker or carrier partners. Continue to push back non-essential loads until after the new year. There will be greater leverage to hold carriers and brokers accountable if a new bid cycle was recently concluded.
Focus on … Van Outbound Tender Reject index
Van rejection rates have soared across the Rust Belt coming out of the Christmas holiday.
Automotive-heavy markets like Detroit have had some of the strongest disruptions of dry van capacity this week, which have driven the national rejection rate to its highest level since Labor Day (around 22.5%).
The large spike in rejections in Detroit is masking some other markets (like Columbus, Ohio) that are seeing the highest percentage of loads being rejected since April with a rejection rate around 26%.
Looking at the weekly change in van outbound rejection rates on the map, the white and blue markets have all had increases over the past seven days while the red markets have all had declines.
The Central Plains section of the U.S. has had some of the most significant declines in rejection rates, but it still remains one of the tightest regions in the country.