The highlights from Thursday’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.
We are likely to see the last boost of volumes leaving Chinese ports prior to the beginning of the Chinese New Year, the national holiday that begins Feb. 1. Currently, SONAR’s TEU Volume Index (IOTI.CHNUSA) is at 245 index points, which is up 35% y/y, down 2.5% month-over-month (m/m), and flat week-over-week (w/w). This index’s forecast of confirmed TEU volumes shows that the highest level of volumes since the beginning of the end of peak season 2021 (at the end of September/early October) will be reached in the next seven days.
While this is certainly a major boost in volumes that will add even more pressure to port congestion issues on both sides of this major trade lane, it may not be enough to push rates significantly higher in the spot market. This is especially true since this push of volume before CNY is an annual event that the entire industry is not only well aware of, but is also preparing for. The importance of what materialized in the ocean container markets as this holiday comes to an end will “set the stage” for what can be expected for the annual contract rating season that normally occurs in late March/early April.
This year, ocean carriers seem to have even more pricing power in their favor as shippers will be focused more on securing space (perhaps at a floating market rate), than they will be concerned with getting the cheapest rates per container in the industry. The U.S. and greater global economy are also exhibiting some very concerning signs (i.e. inflation, market downturns, etc.) that consumer demand could withdraw more quickly than some may have expected.
There is still an enormous amount of freight to move for U.S. providers, and that could last well into 2022, but volumes from overseas could see a significant correction downward if U.S. importers’ demand models anticipate much lower consumer spending.
Watch: Shipper Update
Lane to watch: Grand Rapids (Mich.) to Harrisburg (Pa.)
Overview: Consistently increasing outbound volumes lead to some rates climbing.
Highlights:
- Grand Rapids outbound tender volumes have hit a 30-day high and are continuing to climb steadily.
- Headhaul indices in both markets have been slowly climbing (5% week-over-week [w/w] in Grand Rapids and 9% in Harrisburg), signaling some capacity coming to the markets.
- Harrisburg’s outbound tender rejection volumes have dropped 3% (to 23%) w/w.
What does this mean for you?
Brokers: Rejection rates are continuing to climb. For the most advantageous pricing, secure capacity early and bid on the higher end of things. Rates over $5.00/mile are coming quickly, so be sure to prioritize this lane and let your team know that there is major upward pressure on spot rates.
Carriers: Get some loads into Harrisburg if you can. The high Headhaul Index shows a fair amount of excess capacity, and if you can get there work is bountiful. Pricing power on this lane will continue to stay in your favor. Hold onto those rates.
Shippers: Tender lead times in both markets are averaging 3 days. Keep ahead of schedule as much as possible to maintain consistent rates and capacity. Ship now while you have the chance, before capacity starts to tighten again.
Lane to watch: Atlanta to Dallas
Overview: Tender rejection rates are climbing again out of Atlanta.
Highlights:
- Atlanta’s outbound tender rejection rate hit its highest level since the holiday period, increasing nearly a full percentage point (to 18.24%) this week.
- The average spot rate to Dallas has been relatively flat over the past two weeks but is showing early signs of upward pressure with an uptick of a few cents per mile on Tuesday.
- Dallas outbound rejection rates bottomed out around 13.5% earlier this week but are starting to slowly rise once again. They are still at one of the lowest points of the past two years.
What does this mean for you?
Brokers: Keep an eye on Atlanta capacity and pad margins by a few cents per mile in this lane. There are early signs of destabilization, but nothing severe yet.
Carriers: Accept more loads into the Atlanta market as capacity is showing some small early signs of tightening. This means increasing reload potential, but be aware that the Dallas market has stabilized significantly over the past several months and will produce fewer spot market opportunities.
Shippers: Increase lead times in this lane and double check with your carriers on loads out of the Atlanta market to ensure compliance and reduce the potential for service failures.
Watch: Carrier Update
Lane to watch: Ontario (Calif.) to San Antonio
Overview: San Antonio has some of the highest compliance rates in the U.S.
Highlights:
- Spot rates have fallen nearly 30 cents per mile to start the year in this lane as rejection rates have fallen from over 17% to 11.50%.
- Ontario’s outbound rejection rate has fallen from 13.6% to 11.5% over the past week, accelerating its decline.
- San Antonio’s outbound rejection rate has fallen from over 11% to 6.8% since the start of the year and is among the least-rejected outbound markets in the U.S.
What does this mean for you?
Brokers: Expect downward pressure on spot rates in this lane to continue and potentially accelerate. Ontario is in a stabilizing cycle as carriers have improved their availability in this market due to rate inflation. Rates over $4 per mile are too high.
Carriers: Expect declining spot market availability in the Ontario market especially in this lane. San Antonio will not offer a lot of transactional opportunities, so make sure the rates pay for repositioning to Houston or Dallas, which they all should at this time.
Shippers: Do not pay more than $4 per mile in this lane on the transactional market. If you are seeing less than 85% compliance on this lane over the past few weeks and you are paying more than $3.20 per mile (including fuel) it may be time to evaluate your carriers.
