Reefer tender rejection rates rise from the West Coast
(Chart: SONAR)
Earlier this week, a few of my SONAR colleagues and I spoke with a major freight broker that is heavily involved with reefer. He sees signs of the reefer market tightening in a way that feels different from any point in the past two years. The impact is most pronounced on the West Coast, coinciding with the seasonal period when certain crops are moved.
In the past two years, shippers frequently told the reefer-heavy broker that its rates were too high, but it is now being told its rates are priced competitively. Similarly, when sourcing reefer capacity, the same broker previously had no issue finding carriers to cover loads, but lately it is seeing carriers reject those loads at rates it had not seen in recent years.
China-to-US ocean spread normalizes
The ocean spot rate to move a container from China to the U.S. East Coast typically exceeds the rate to move a container from China to the U.S. West Coast by about $1,000 per container.
Freightos ocean spot rates can be seen in SONAR via the FBXD set of tickers, and for several weeks starting in mid-October, there was an unusual phenomenon: The rate to move 40-foot containers from China to the U.S. East Coast (red line above) was roughly at parity with the rate from China to the U.S. West Coast (white line above). That’s unusual because shippers moving containers to the East Coast would normally bear a higher cost of about $1,000 per container associated with a two-week-longer sailing time. The current spread of $1,029 represents a normalization.
Driving the normalization, the rate increased from China to the U.S. East Coast while the rate from China to the U.S. West Coast was mostly unchanged. That suggests the change in rates may be related to ocean carriers managing capacity downward by blanking sailings. That is supported by the Ocean TEU Rejection Index in the SONAR Container Atlas applications, which shows rejection rates from China to all U.S. ports currently at 17.3%, the highest of the past five months and up from 13.1% at the start of November.
The Stockout show: Cyber Friday?
(Image: FWTV)
On Monday’s The Stockout show, Grace Sharkey and I discussed a few topics, including freight fraud, potential changes to the Food and Drug Administration and the Supplemental Nutrition Assistance Program under the second Trump administration, and SONAR data.
In addition, given the time of the year, and since The Stockout is a retail-focused show, the show reviewed Black Friday sales trends. Mastercard SpendingPulse shows that Black Friday sales were at least as strong as most expected, up 3.4% versus last year, while other data sources showed even higher sales growth (e.g., Adobe places sales growth at 10.2% y/y). That compares favorably to the National Retail Federation’s expectation for the holiday season as a whole, which it previously forecast to be up 2.5%-3.5% over last year. Notably, Mastercard breaks down Black Friday sales growth into a 14.6% increase in online sales versus a 0.7% in-store sales increase. So, the trend toward e-commerce does not appear to be slowing, which could pressure parcel networks during their peak weeks. Online orders of often high-value merchandise made during this peak time may also move parcel carriers’ mix back toward premium services following recent quarters during which their mix shifted in the direction of lower-cost/lower-service options.
Watch Monday’s The Stockout show here and check out the full playlist here.