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: Chicago to Dallas
Overview: Brokers should raise rates to pass on rising purchased transportation costs.
Highlights:
- The door-to-door domestic intermodal spot rate is $3.00/mile, including fuel surcharges, which is down 8.1% in the past month.
- The dry van spot rate in the lane is $3.50/mile, including fuel surcharges, up from $3.34/mile on February 2.
- The dry van tender rejection rate in the lane increased 88 bps in the past two weeks to 20.1%.
What does this mean for you?
Brokers: To preserve margins, raise your rates to reflect rising dry van tender rejection rates and rising spot rates in the lane. When bidding for capacity, keep in mind that $3.50/mile, including fuel, is the average rate that brokers are paying for dry van capacity and $3.71/mile and $3.13/mile represent brokers’ current buy-rates in the 67th and 33rd percentiles, respectively.
Carriers: Before heading to Dallas, carriers should know that the Dallas freight market is not as tight as most freight markets currently. Its 14.7% outbound van tender rejection rate is well below the 19.7% national van tender rejection rate. However, it should be easy for carriers to get reloaded in Dallas given the current Dallas Van Headhaul Index of 68.5.
Shippers: The 14% spread between domestic intermodal and dry van may be wide enough to entice some spot shippers to utilize rail intermodal in the lane for shipments that are less time-sensitive. For highway loads, To help secure capacity for highway loads, keep lead times extended past the 2.8-day average for Dallas inbound loads.
Watch: Shipper Update
The most recent volume data from the Association of American Railroads show total intermodal units down 11.3% year-over-year (y/y) in the past week and down 15% y/y in the past four weeks.
SONAR data adds context to that overall decline by breaking down containerized intermodal volume data into market segments and lanes. That’s especially important now given the wide divergence in volume trends between the international and domestic intermodal markets.
Recent double-digit declines in overall intermodal unit volume have been driven by the international intermodal segment, which consists primarily of 40-foot containers and also includes 20- and 45-foot containers.
In the past seven days, international intermodal volume is down 20% y/y, while volume in the domestic intermodal segment is up 2% y/y. That’s important information for shippers because the rising domestic intermodal volume suggests there are fewer operational constraints to move 53-foot containers than there were for most of the past nine months.
Lane to watch: Grand Rapids (Mich.) to Charlotte (N.C.)
Overview: There is upward pressure on spot rates in the Charlotte market because the amount of inbound loads heavily outweighs outbound.
Highlights:
- Outbound tender rejections are still above 20% (25.22%) and trending upward because of last week’s storm, which buried half the Midwest under snow.
- Charlotte hit its lowest tender rejection rate since the beginning of December at 16.72%.
- FreightWaves TRAC rate clocks in at $4.21 per mile, making it consistent for the first week of the month. That beats the yo-yo we saw in January.
What does this mean for you?
Brokers: Keep to those rates you have had for the last few weeks. Rejections are heading down in Charlotte. While there are more inbound loads than outbound loads and carriers might try to raise rates to combat the lack of outbound loads, stay firm.
Carriers: Charlotte’s capacity is tightening and with a Headhaul Index of -130.60 there are significantly more inbound loads than outbound. Increase your rates to give you some cushion as drivers might have to deadhead farther to get a load.
Shippers: Charlotte’s outbound tender lead time has dropped almost one-half day in less than a week. If you have anything outbound from Charlotte you should have no problem getting it covered. However, Grand Rapids is a different story. Give a full 3 days for outbound loads (if not more) to avoid paying highly inflated spot market prices.
Watch: Carrier Update
Lane to watch: Joliet (Ill.) to Chattanooga (Tenn.)
Overview: Rejection rates spike out of Joliet.
Highlights:
- Joliet’s outbound rejection rate jumped back over 20% this past week to its highest value since just after the New Year.
- Rejection rates to Chattanooga also increased 200 bps over the past few days, but spot rates have not responded just yet—having fallen 14 cents per mile since January 29 to $4.44.
- Chattanooga’s outbound rejection rates have fallen significantly since the start of the year and are now well below the national average.
What does this mean for you?
Brokers: Be wary of delayed spot rate increases that will likely follow the sharp increase in rejections at the end of last week. Some rates may increase sharply as general capacity is disrupted, so consider getting rates at or below $4.44 per mile a good deal in this lane.
Carriers: Be wary of easing conditions in the Chattanooga market and make sure you have a solid contracted preplan nearby. Current spot rates should more than cover deadhead to the high-volume Atlanta market. Tender waterfalls should have peaked in the Joliet market so take advantage while the action is hotter.
Shippers: Double-check with your carriers for any scheduled pickups in this or other outbound Joliet lanes. Joliet had one of the strongest outbound rejection rate increases in the U.S. over the past week, putting compliance and load coverage at greater risk.
With Chinese New Year underway, container rates from China to the U.S. have yet to see any significant decreases like they typically do during this major Asian holiday.
Rates from China to the U.S. West Coast have only dipped a small 2% (to $15,218 per 40-foot container [FEU]), and rates from China to the U.S. East Coast have fallen only 1% (to $16,658 per FEU).
However, rates to the West Coast are still up 169% y/y and rates to the East Coast are still up 192% y/y.
While this is certainly against the typical seasonal pattern that U.S. importers have experienced for many years in (at least) the past decade, SONAR’s Inbound Ocean TEU Volume Index provides insight into why ocean container demand from China to the U.S. has maintained enough pressure to keep container rates from dropping significantly.
Currently, TEU volumes are positive 9% month-over-month (m/m) and 4% y/y, but for the next 7 days, volumes are forecasted to dip into negative territory, which should help bring container spot rates down a bit further.
