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: Atlanta to Philadelphia
Overview: Atlanta’s outbound rejection rate continues to fall.
Highlights:
- FreightWaves TRAC spot rates from Atlanta to Philadelphia have been relatively flat through the first half of the month, hovering around $3.88 per mile.
- Atlanta’s outbound rejection rate continues to fall to new annual lows, hitting 13.5% on Tuesday. Rejection rates to Philadelphia have moved similarly but are around 5 percentage points higher than the market average.
- Philadelphia’s outbound rejection rates have bounced between 17.5% and 22.5% over the past two months with no definitive trendline.
What does this mean for you?
Brokers: Expect the easing Atlanta capacity to catch up to this relatively undesirable lane in the near future. Carriers continue to avoid heading into the Northeast, but eventually their options will lessen. Expect spot rates to be flat to slightly down this week. Target $3.88 per mile and lower.
Carriers: Consider loads moving into the Northeast more often as capacity continues to be challenged and rates are inflating rapidly. They are still not on par with loads coming off the West Coast, but there is plenty of reload potential and now is the time to start laying the foundation for long-term relationships in this region.
Shippers: Evaluate your carriers in this lane if you compliance is below 80% and your contract rates are above $3.50 per mile. This is an unfavorable direction for a carrier to move, but Atlanta capacity is easing. Contract rates should be closer to the spot rate in this type of lane to ensure strong compliance. However, the long-run play may not be to increase your rates as the market is showing early signs of easing.
Watch: Carrier Update
Lane to watch: Indianapolis to Ontario (Calif.)
Overview: Spot rates surge as rejection rates decrease from an early February spike.
Highlights:
- Indianapolis to Ontario spot rates rise to $1.81, a notable increase from end-of-January lows of $1.47 per mile as the Ontario market outbound tenders decline to 7.44%.
- Outbound tender rejections in the Indianapolis market decreased but remained elevated at 25.34% following a surge to a 6-month high of 28.8% on Feb. 7.
- Indianapolis to Ontario outbound tender rejections fell to 15.43%, indicating this return lane to southern California remains a favorable location for fleets compared to other lanes that average between 22% to 25%.
What does this mean for you?
Brokers: The mismatch between westward and eastward lanes in the Indianapolis market presents an opportunity to increase margins due to the rate imbalance and spot market rate movement. Even with port and drayage delays, the Southern California markets’ outbound spot rate decline will create an opportunity to push down rates. With tender rejections at 15% there will be fewer spot loads returning to California compared to contracted committed lanes. Remember that brokerages thrive on volatility, and current market conditions can create big winners if they leverage their data and buying power first.
Carriers: Indianapolis outbound lanes to Southern California continue to overperform, with tender rejections around 15% compared to other outbound lanes in the market that hover between 22% to 25%. With this information in mind, expect favorable spot rates for most eastward lanes as lingering weather conditions and winter storm systems incentivise market carriers to focus on Sunbelt states. Expect brokers and shippers to put downward pressure on rates going west due to the tender rejection variance.
Shippers: Westward loads present opportunities for savings but intra-Midwest, Southwest and Northeast regions will continue to experience volatility due to weather conditions and tender rejection levels. The volatility will also cause transportation costs to increase. Flexibility in scheduling and load tendering can provide some cost savings, but this also depends on the commodity and internal supply chain characteristics. Given recent winter storms, consider routing adjustments, as carriers will seek to avoid parts of Colorado and Utah en route to California, and focus on the I-40 corridor through parts of Oklahoma, New Mexico and Arizona.
Watch: Shipper Update
Lane to watch: Chicago to Elizabeth (N.J.)
Overview: Rising dry van rates makes rail intermodal more attractive for shippers moving less time-sensitive loads.
Highlights:
- In the past week, an average of 221 domestic intermodal containers moved in the lane, down from an average of 300/day during much of the fourth quarter and early first quarter, which may be indicative of intermodal congestion impairing volume.
- The intermodal tender rejection rate for outbound Chicago loads is 7.9%, an elevated level relative to historical averages.
- The spot rate to move 53-foot containers door-to-door in the lane, including fuel, is $3.40/mile, up 8.5% in the past month. That intermodal spot rate is 30% below the average dry van spot rate of $4.86/mile that brokers are paying for capacity, as shown in the SONAR Market Dashboard app.
What does this mean for you?
Brokers: Raise your rates to preserve margins in light of rising rates that brokers are paying for on-demand capacity. When bidding for capacity, keep in mind that the average buy-rate that brokers are paying for dry van capacity in the lane is $4.86/mile, with $5.11/mile and $4.56/mile representing buy-rates in the 67th and 33rd percentile, respectively.
Carriers: Making the two-day trip to Elizabeth will put you in a market with a van tender rejection rate of 14.7%, which is 360 basis points (bps) below the national van tender rejection rate. That suggests that the Elizabeth market is not as tight as most and, therefore, carriers will likely find fewer available opportunities for highly rated loads on the spot market than can be found in many other freight markets.
Shippers: Intermodal service may be an issue in the lane, but rates suggest that the savings associated with intermodal may be worth the reduced level of service for less time-sensitive loads. For more time-sensitive loads, keep lead times extended to at least the 2.5-day average associated with loads moving in that lane.
Focus on … Van capacity trend market direction
Signs that capacity conditions are improving are starting to pop up across the country. The national tender rejection rate continues to trend lower, signaling relative capacity across the country is starting to ease.
The Van Capacity Trend Market Direction (CTDV52) shows how capacity is trending; positive numbers indicate capacity is loosening while negative number signals capacity is tightening.
Across the center of the country, capacity continues to loosen, especially in the larger markets like Dallas and Memphis.
Markets surrounding the Gulf Coast including New Orleans and Mobile, Alabama are seeing capacity tighten as carriers continue to flee the smaller, secondary and tertiary markets for the large freight hubs.
