The highlights from Friday’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: Los Angeles to Chicago
Overview: Intermodal spot rates decline further, and are now down 39% m/m.
Highlights:
- Suggesting that the Class I railroads have become less concerned with protecting capacity for contracted shippers, intermodal spot rates from LA to Chicago declined significantly for a second consecutive week. In the past month, door-to-door domestic intermodal spot rates are down 39% in the lane to $2.51/mile, including fuel surcharges.
- Domestic intermodal volume averaged 1,131 containers/day in the past week, which is 8% below the daily average of 1,240 units/day in early December.
- The average dry van spot rate that brokers are paying for capacity in the lane is $3.73/mile, including fuel surcharges, which is $0.10 higher than what they paid one month ago.
What does this mean for you?
Brokers: In light of Market Dashboard showing that spot rates have risen, brokers may want to raise rates slightly in order to preserve margins. When bidding for capacity, keep your purchased transportation costs below the average of $3.73/mile (includes fuel), but note that bidding less than $3.54/mile, including fuel (the spot rate in the 33rd percentile) may prove to be too aggressive.
Carriers: For van carriers that are willing to make the four-day trip, this is a solid lane. While the Chicago van tender rejection rate of 18.0% is 210 basis points (bps) below the national van tender rejection rate, the Chicago Van Headhaul Index has improved from below 20 to 43. This suggests that the Chicago market is tightening and it should be an easy location for carriers to get reloaded.
Shippers: In contrast to the past year, the respective intermodal and dry van spot rates suggest that it is economical to use rail intermodal to move spot loads. However, the subpar intermodal volume in the lane, as well as the elevated outbound LA intermodal tender rejection rate of 11% (low single-digits is more typical), suggest that intermodal shippers are likely to face delays.
Watch: On The Spot
Lane to watch: Salt Lake City to Chicago
Overview: Mid-month lulls for both markets make it an opportune time to ship.
Highlights:
- Salt Lake City’s rejection rates dropped to 26% after hitting 33% last week. Outbound volumes hit a three-month high.
- Chicago rejection rates are coming in at 23%, which is a return to normal for this market after the rates skyrocketed to a three-month high.
- Spot rates are coming in at $2.84/mile for this lane, which is about average for this lane for this time of the month.
What does this mean for you?
Brokers: Rejection rates in Salt Lake City historically spike upward in the last two weeks of the month. Be prepared for an upswing as we come into the final weeks of the month. Brace for increased spot rates.
Carriers: As Chicago braces for its end-of-month upswing, know your worth and don’t settle for less. In other words, hold strong rates and brace for tightening conditions. If you have some extra trucks, get them a load to Chicago.
Shippers: The dip won’t last for long. Try to ship out as much as you can before next week. Otherwise, keep tender lead times at a minimum of 3.5 days to ensure they get covered and rates won’t be over-inflated as a result of tight capacity.
Tight markets in 5 SONAR charts
Freight data in SONAR shows continued tightness in the freight markets. Here is a mini-highlight reel of five SONAR charts:
Truckload spot rates hit fresh highs. Dry van (blue) and reefer (green) spot rates, including fuel surcharges, average $3.83/mile and $4.88/mile, respectively. Those rates are likely to come down in the coming weeks as more capacity returns to the market following the holidays, but in general, rates for on-demand capacity continue to rise, showing continued tightness in the truckload sector.
Reefer carriers are rejecting 39% of tenders. While it’s not quite the “coin-flip compliance” of last spring, the current reefer tender rejection rate is especially remarkable after the past year of rising contract rates. Reefer contract rates are up in the double-digit percentages versus last year at this time (purple line on left axis below). One might have expected carriers to become significantly more compliant after contracts were renegotiated at higher rates.
Ocean rates have stabilized at a highly elevated level. Late last year, eastbound trans-Pacific ocean rates had declined ~25% from their September highs after rising ~3x from late 2020. Some recent appreciation now leaves rates ~15% off those September highs, suggesting that the ocean markets are unlikely to immediately correct. If congestion at the ports eased, the resulting improvement in vessel productivity would effectively increase capacity and lower rates, but vessel congestion has only gotten worse to start the year.
Import volume should keep driving demand for domestic freight transportation and warehousing space. Maritime import shipment volume in SONAR (which includes both containerized and non-containerized volume) is significantly higher than year-ago levels in nearly all the major U.S. ports.
Intermodal contract rates (not including fuel) were up 14% y/y in 4Q21. The past year was frustrating for domestic intermodal shippers that saw their contract rates rise double digits while also experiencing delays due to terminal congestion and equipment shortages. As annual domestic intermodal contract reprice in 2022, shippers are likely to see rates again rise double digits on top of last year’s increases.
