The highlights from Tuesday’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: Atlanta to Lakeland (Fla.)
Overview: FreightWaves TRAC rates are off the highs but face upward pressure as capacity tightens.
Highlights:
- Like the vast majority of the country, rejection rates from Atlanta to Lakeland increased by over 110 bps w/w to 21.1%, 118 bps lower than the national average.
- Even prior to the holiday noise, the Headhaul index increased over 20%, signaling that more outbound loads are being tendered and that capacity will continue tightening.
- FreightWaves TRAC spot rates are 10 cents per mile off the recent high but could face upward pressure throughout the week.
What does this mean for you?
Brokers: Pad your margins, locking in the lower rates ahead of further capacity tightness along the lane. Work with carrier partners to secure outbound freight in Lakeland to make the destination more attractive at lower rates.
Carriers: Be willing to accept freight into Lakeland because a recent uptick in tender volumes signals that securing an outbound load will be easier. Expect greater spot market activity in the Lakeland market; you may be able to get higher rates out of what is normally a backhaul market.
Shippers: Expect disruptions to your network and try to avoid the spot market as carriers will have the upper hand in the Lakeland market. Tender loads further in advance during the week as the holidays tend to keep drivers off the road.
Watch: Loaded and Rolling, episode 2
Lane to watch: Detroit to Chicago
Overview: Van rates continue an upward trend as tender rejections reach record levels due to limited capacity.
Highlights:
- Detroit to Chicago outbound tender rejections increased from 18 basis points (bps) December 1st to 33.05 bps on December 27th, an 83.6% increase.
- FreightWaves TRAC spot rates for this lane stand at $3.66 per mile, a 33 cent increase from mid-December lows.
- Chicago to Detroit outbound tender rejections stand at 28.31%, indicating tight capacity in both markets.
What does this mean for you?
Brokers: Communicate issues on contracted lanes, reduce tender acceptance rates and only bid if a truck is available due to lane volatility. Communicate with committed carriers on availability into the new year and notify customers if extra capacity becomes available.
Carriers: Pay close attention to driver availability numbers and take into account drivers taking extra days off at the beginning of 2022 when booking or accepting customer freight. If you have extra capacity, consider spot freight first due to elevated margins (after determining that this will not disrupt most of your contracted committed lanes).
Shippers: Communication and prioritization are key. Leverage tender compliance and determine if pushback is available in the event of a recently completed bid or RFP. Brokers and carriers will continue to see capacity challenges during the holidays; Wait to schedule non-priority loads until after the New Year holiday.
Lane to watch: Elizabeth (N.J.) to Chicago
Overview: The spread between intermodal and dry van spot rates remains high despite the recent intermodal spot rate increase.
Highlights:
- The door-to-door domestic intermodal spot rate is up 16.5% month-over-month in the lane to $1.69/mile, including fuel surcharges.
- The dry van spot rate that brokers are paying for capacity, per the FreightWaves Market Dashboard, is $2.48/mile, including fuel surcharges.
- The van tender rejection rate in the lane is 22.6% despite the Elizabeth outbound van tender rejection rate being a relatively low 14.9%.
What does this mean for you?
Brokers: When bidding for capacity, keep in mind that the market rate, according to Market Dashboard, is $2.48/mile with $2.63/mile and $2.31/mile representing buy rates in the 67th and 33rd percentiles, respectively. Those rates include fuel surcharges.
Carriers: It should be relatively easy for carriers to get reloaded in Chicago given both the size of the freight market and the current Van Headhaul Index of 29, which indicates that there is more outbound freight than inbound freight. Carriers should keep in mind, though, that the Chicago market is not as tight as most; its current van outbound tender rejection rate of 16.95% is 481 bps below the national van tender rejection rate of 21.76%.
Shippers: Despite the recent increase in intermodal spot rates, they remain 32% below truckload spot rates, so shippers may want to use rail intermodal for less time-sensitive spot loads.
SONAR tips: Drewry World Container Index
The Drewry World Container Index (WCI) measures the bi-weekly price movements of 40-foot containers in seven major maritime lanes. It is expressed as an average price per 40-foot container (in US$). There is also a global price that is an average across all seven lanes.
The Drewry World Container Indices are very good indicators of freight volumes (demand) moving in the selected maritime lanes and the subsequent port cities. This can often be a leading indicator of whether demand for ocean freight is increasing or decreasing across a given trade lane.
You can use the WCI to better understand ocean freight demand in a given trade lane. Since a great deal of freight originates overseas and then is distributed into freight networks across the U.S., seeing a major price increase from Shanghai to Los Angeles, for instance, is a good indicator that Los Angeles freight volumes will increase (with a lag of a few weeks) and likely means that demand will increase throughout the entire market.
The difference between the Shanghai to Los Angeles price and the Shanghai to New York price tells you the value of shipping via a container rather than shipping on land. If there is low capacity via rail or truck on land, shippers now have the option to ship through the Panama Canal to New York (or another East Coast port).
In the treemap below, SONAR users can view the Drewry World Container Index price for a 40-foot container in the spot market across all 12 major ocean trade lanes.
