The highlights from Wednesday’s SONAR reports are below. 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: LA to Dallas
Overview: Brokers’ buy rates for on-demand dry van capacity have fallen to 26 cents a mile below the national average.
Highlights:
- Dry van carriers are rejecting 5.1% of tenders in the lane, roughly in line with the 5.5% tender rejection rate for all LA outbound loads that exceed an 800-mile length of haul.
- The door-to-door intermodal spot rate of $2.79 a mile, including fuel, is the lowest it has been since April 2021.
- The spot rate that brokers are paying for on-demand dry van capacity has declined from $4 a mile at the beginning of the year to $2.57 a mile currently. Since the start of the year, this lane went from having a higher spot rate than the national average to having a lower one.
What does this mean for you?
Brokers: When bidding for dry van capacity, keep in mind that $2.57 a mile represents the average spot rate that brokers are paying for capacity while $2.69 and $2.43 represent buy rates in the 67th and 33rd percentile, respectively. Those spot rates all include fuel.
Carriers: Dallas is currently a solid destination for carriers. The Dallas van outbound tender rejection rate of 7.3% is not too far below the national dry van tender rejection rate of 8.7% and Dallas is solidly a headhaul market with a Van Headhaul Index of 53.
Shippers: The railroads continue to cut domestic intermodal spot rates, but not to the point that would encourage spot shippers to use domestic intermodal in the lane given where dry van spot rates are. The still-high intermodal spot rates suggest that the railroads remain concerned with protecting capacity for contractual shippers.
Watch: Carrier update
Lane to watch: Jacksonville, Florida, to Atlanta
Overview: Spot rates and tender rejections climb on the heels of truckload volume increases.
Highlights:
- Spot rates increased from an average of $2.93 a mile to $3.25 a mile in the Jacksonville to Atlanta lane over the past 30 days. However, volatility remains with a current low of $2.96 a mile and a high of $3.96 a mile.
- Outbound tender rejection rates from the Jacksonville market during that same 30-day period increased from an early May range of 9.13% to 12.5% to higher than 17.94% following the Memorial Day weekend. Jacksonville to Atlanta saw a similar upward trend but is currently at 14.54%.
- Jacksonville outbound load tender volumes saw an increase from early May ranges between 160 to 170 bps, but also increased (similar to spot rates) leading up to the Memorial Day weekend, topping out at 195 bps before falling to 174.38 bps post-Memorial Day.
What does this mean for you?
Brokers: Expect rate volatility to remain due to the volatile outbound tender volumes. Given the large rate discrepancy coming out of Jacksonville, there is a great opportunity to push down rates if buying power permits. Expect some carrier pushback as most are used to some form of seasonality during produce season and may attempt to offset rising costs with tighter rate discipline.
Carriers: Volatility can be a blessing and a curse depending on your customer or broker. Some may attempt to drive down rates while others could pay a premium for service. The recent rise in outbound tender rejections indicates that carriers are gaining pricing power and is reflected in the rising (but volatile) spot rates. While the Jacksonville to Atlanta lane remains popular, knowing that 14.54% of loads are being rejected could alleviate some pressure from service-sensitive customers, especially as capacity slowly enters the market after the Memorial Day weekend.
Shippers: The rising outbound tender rejection levels and volumes will cause some service disruptions to occur. The rising spot rates are also reflected in the increase of the outbound tender lead times from 2.65 days to 2.84 days as shippers seek to tender loads further in advance for some transportation cost savings. While there is a large volatility in spot market rates, developing and expanding a carrier/broker routing guide can provide some savings.
The biggest rail news story on FreightWaves during the past week was on the topic of rail service becoming a much larger political football. A group of 19 senators from 13 states wrote a letter to the Surface Transportation Board (STB, the federal agency tasked with economic regulation of the freight railroads) urging Chairman Marty Oberman to take action on inadequate rail service. What was notable, relative to years past, was just how much the coalition of senators speaking up for shippers’ interests has expanded to now include coal states (Ohio and West Virginia), agriculture states (Florida, Idaho, Illinois, Iowa, Kansas, Minnesota, Missouri, North Dakota and Wisconsin), a chemicals state (Louisiana) and Arizona.
Rail intermodal does not face the same regulatory scrutiny as the rail carload businesses because it is deemed to be competitive with the highway by the STB, but intermodal service has also been poor in the past year. As of now, rail intermodal service levels are better than they were in the middle of last year (which isn’t saying much), but are not as strong as shippers would prefer. In SONAR, I recommend monitoring both domestic intermodal volume by lane (which is influenced by service levels, among other factors), intermodal tender rejection rates (which have normalized) and data that the STB has started collecting, such as intermodal trains holding per day (which remains elevated on BNSF).
