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: Columbus, Ohio, to Atlanta
Overview: Outbound tender rejection declines lead to further spot market rate deterioration.
Highlights:
- Spot rates deteriorated rapidly beginning March 26, falling from an average of $3.95 per mile down to $3.28 per mile over 30 days.
- Further loosening of trucking capacity in the Columbus market, paired with declining volumes, caused outbound tender rejections to fall from 16% March 26 to 9.06% during that same 30-day period.
- The Atlanta market fared no better, with outbound tender rejection levels declining from 12.75% March 26 to 8.64% in the past month due in part to declining outbound tender volumes.
What does this mean for you?
Brokers: Trucking capacity competition for fewer available spot loads appears to be a major contributor to declining spot rates from Columbus to Atlanta. The declining tender rejection levels in both markets indicate that incumbent carriers are being prioritized for committed contracted loads and contracted rates still appear to be favorable compared to shippers opting to put their loads on the spot market. During this disruptive period, focus on taking advantage of the declining rates to gain greater margins before customers attempt to renegotiate contracted lanes if rates decline further.
Carriers: The declining outbound tender rejection rate will put greater service expectations and tender compliance on carriers that have a strong contracted freight network. For market carriers who focus on spot market opportunities, the challenge becomes picking favorable loads among a shrinking number of potential options. For those carriers, the main challenge will be balancing revenue goals with the timing of load bookings, as failure to secure a return load could cause further issues due to other carriers competing in the market and driving down rates.
Shippers: These recent declines in volumes and tender rejection levels indicate that trucking demand appears to be softening relative to available loads. This can be an opportunistic period for shippers as both brokers and carriers will begin competing against each other for limited freight options. This may provide the opportunity to drive down prices and decrease overall transportation spending. With inflation at record levels, there is a high likelihood of shippers attempting to maximize their leverage at the expense of constrained margins for both carriers and brokers.
Service was a major theme in the Class I railroads’ earnings reports this past week. Executives at both Union Pacific and CSX said that recruiting and training sufficient crews is the only barrier to improved service and dismissed claims that precision scheduled railroading is contributing to service woes. Service issues will be explored more fully in the coming week in a two-day public hearing with the Surface Transportation Board, the federal agency responsible for economic regulation of the freight railroads. Some data points contained in SONAR provide insight into rail intermodal service. For example, deviations in domestic intermodal volume from domestic truckload volume can be an indicator of service degradation, which was clear during much of last year. In addition, when rail networks are running fluidly, a small percentage of intermodal tenders are rejected — generally around 1%. That is currently true for outbound Los Angeles intermodal tenders with a 1% rejection rate, but the Chicago area is seeing a higher intermodal tender rejection rate of 6% and it has often spiked in the high single digits.
Watch: Carrier update
Lane to watch: Harrisburg, Pennsylvania, to Chicago
Overview: More loaded containers, and fewer empties, are moving in the lane.
Highlights:
- Loaded domestic containerized intermodal volume averaged 255 units per day in the past week, which is close to a 52-week high.
- Since the second week of April, the volume of empty domestic containers being repositioned in the lane declined from 100/day to 49/day.
- The published spot rate to move 53-foot containers door to door is $2.18/mile, or 15.5% below the most recent average dry van spot rate in the SONAR Market Dashboard.
What does this mean for you?
Brokers: The average rate that brokers are paying for on-demand dry van capacity has declined 11% in the lane in the past month to $2.58/mile. Therefore, brokers should lower their bids to maintain margins. When negotiating with carriers, cite the Chicago Van Headhaul Index of 31, which suggests that it should be easy for carriers to get reloaded in Chicago.
Carriers: The presence of available domestic intermodal capacity in the lane suggests that highway shipments in the lane are likely to be time-sensitive, so get compensated accordingly. Chicago is a solid destination for dry van carriers with an outbound tender rejection rate slightly above the national rate and a Van Headhaul Index of 31.
Shippers: The recent pickup in loaded intermodal volume in the lane suggests that shippers are finding value in the service and/or shippers are content with service slower than truckload with inventories rising in many product categories. Rising loaded volume has eroded some of the excess intermodal capacity in the lane, but a meaningful amount of capacity remains.