The highlights from Monday’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.
Winter weather plagued the Midwest for the second week in a row. That made capacity yo-yo back and forth; however, outbound tender rejection rates ended the week at 18%. Rejections under 20% mean there is an inflated spot market but not at the ludicrous levels of inflation we’ve seen. Overall, most markets are seeing spot rates trend downward, making the sticker shock of 2021’s Q4 recede a bit from collective memories. Outbound tender volumes have remained pretty constant over the last month, meaning we aren’t getting worse in terms of a capacity crunch. Typically, January and February are the slower months in terms of volume; however this year and last year haven’t had the typical slowdown that allows shippers to take advantage of the low rates and higher capacity. Certain markets are loosening but it’s a matter now of if that market is the right one.
Lane to watch: Kansas City to Dallas
Overview: Kansas City’s outbound rejection rates are at their lowest level in two months.
Highlights:
- Kansas City’s outbound rejection rate has fallen from 32.5% on Feb. 10 to 25.9%, its lowest level since December 21.
- FreightWaves TRAC spot rates have fallen $0.16 per mile in this lane over the past week to $3.83 per mile.
- Dallas’ outbound rejection rate has declined 35 bps over the past few days after peaking at around 16.3% on the 24th.
What does this mean for you?
Brokers: Expect easing conditions in this lane with most buy side rates coming in under $4 per mile. Accept any rates less than $3.70 per mile. Kansas City is still relatively tight compared to the rest of the U.S. so do not reduce your priority for finding coverage just yet.
Carriers: Expect less spot volume and route guide waterfall activity in this lane this week. You may have to drop rates a cent or two to win loads in this lane, but nothing terribly aggressive. The Kansas City market remains tight in relation to most others in the U.S. so continue to accept inbound loads.
Shippers: Expect marginally improving conditions in this lane this week. Continue to communicate with your carriers if your contract rates are under $3 per mile to ensure compliance. Lead times above 3 days are still heavily advised out of this market.
Watch: Carrier Update
Lane to watch: Harrisburg (Pa.) to Charleston (S.C.)
Overview: Charleston’s outbound tender rejections are on the rise after falling last week.
Highlights:
- Charleston’s outbound rejection rates hit 12% and are steadily rising after plummeting last week.
- FreightWaves TRAC spot rates have hit $3.57 per mile, the lowest rate in 30 days.
- Harrisburg’s outbound rejection rates have fallen to 22.45% after hitting highs of 24% last week.
What does this mean for you?
Brokers: Capacity is loosening in Harrisburg; expect spot rates to trend downward. Charleston is not as tight as the rest of the country, so shift priority to a tighter market when covering lanes. Rates should hover around $3.50 for a while; take any rate less than that.
Carriers: Spot volume will be strong out of Harrisburg, but rely on contracted lanes out of Charleston over the next few days until the market tightens again. Rates are trending downward; don’t be afraid to bid on the lower side.
Shippers: Rates in this lane shouldn’t bust the budget. Outbound tender lead times are hovering around three days, so staying around that time frame will ensure the best possible rates. Capacity is loosening out of Harrisburg; shipping additional loads from that market before it tightens again would be advisable.
Watch: Shipper Update
Lane to watch: Elizabeth (N.J.) to Chicago
Overview: Rejections are already up 134 bps w/w, and could move higher as the Headhaul Index surges 26%.
Highlights:
- Elizabeth outbound volumes are up 8% w/w, but with maritime import volumes hitting a new all-time high for daily volumes, demand is likely to surge higher.
- Elizabeth’s Headhaul Index has increased over 26% w/w, signaling the capacity is likely becoming increasingly imbalanced.
- Outbound tender rejections in Elizabeth are already up 134 bps w/w, but are likely to move higher because of the rapid increase in the Headhaul Index.
What does this mean for you?
Brokers: The w/w change of 26% in the Headhaul Index is a large shift in the Elizabeth market, and it is being primarily driven by a 8% increase in outbound volumes. Outbound tender rejections are already up 134 bps w/w, so expect significant upward pressure on spot rates this week and for capacity to be especially tight.
Carriers: Elizabeth pricing power is likely to shift even further in your favor in the coming days due to a growing imbalance between inbound and outbound volumes. Keep an eye on outbound tender rejections, and if they reverse their current trend and shift higher, then you are likely to see significant upward pressure on spot rates.
Shippers: Your shipper cohorts in Elizabeth are still averaging 2.8 days in tender lead times, but history shows that when capacity tightens quickly in Elizabeth, lead times should be between 3.5 and 4 days to help relieve some of the pressure being put on both capacity and spot rates.
The biggest takeaway from the last few weeks is the changing of the guard in terms of the trailer type with the highest rejection rate. Reefer rejection rates had been relatively stable, hovering just below 40% for the past four months, but those rates have fallen below 30% for the first time since August 2020. Reefer rejection rates are falling right before the start of many spring produce harvests across the U.S., so this decline may provide some padding before capacity takes another hit. Flatbed rejection rates have been trending higher since September, but have hit all-time highs and increased in volatility over the past few months. With oil prices where they are and potentially increasing because of the Russian invasion of Ukraine, flatbed capacity may be about to be as tight as it has ever been. Seasonal construction activity is set to ramp up in the coming weeks as warmer temperatures hit the northern tier of states and the industrial sector is still applying copious amounts of pressure. At this point, dry van capacity seems to be a footnote with rejection rates around 18.5%.
