The highlights from Monday’s SONAR reports are below. 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 Dallas
Overview: Falling rejections have not pushed rates lower (yet).
Highlights:
- Average spot rates have been trending higher over the past two weeks, hovering just above $2.65 per mile over the past week in this lane.
- Atlanta’s outbound rejection rates have continued to fall over the past week (from 13.12% to 12.65%). Lane-specific rejection rates to Dallas are falling slowly as well, but averaging roughly 2 percentage points higher than the market.
- Dallas’ outbound rejection rate has dropped significantly this month, falling from 15.4% on March 7 to 11.28%.
What does this mean for you?
Brokers: Target rates around $2.65 per mile but expect declining volumes in this lane this week on the transactional market.
Carriers: Dallas is stabilizing rapidly, so expect less help from both contract and spot markets out of this area. Attaining loads at a rate above $2.65 per mile should be considered a win.
Shippers: Deteriorating conditions should make this lane easier to manage, but declining rejection rates have not translated yet to lower spot rates.
Truckload capacity continued to ease rapidly last week, with tender rejection rates falling another percentage point to their lowest level since June 2020. The current easing appears to have occurred due to a glut of inventory caused by over-ordering and consumer demand erosion. This was bound to happen at some point, but the easing is not occurring evenly across all modes — flatbed capacity continues to show tightness with spot and rejection rates continuing to trend higher. Refrigerated spot and rejection rates have been falling rapidly since mid-February, while van capacity did not improve considerably until earlier this month. While there is still a long way to go, the current signs point to a rapidly easing environment with a complete disconnection from seasonal trends (unless you are dealing in the flatbed arena).
Watch: Shipper update
Lane to watch: Cleveland to Atlanta
Overview: Capacity is likely to tighten as the Headhaul Index increases 25% w/w.
Highlights:
- Cleveland outbound tender volumes are up 11% w/w, signaling that demand for outbound truckload capacity is increasing.
- The Headhaul Index in Cleveland is up 25% w/w, signaling that capacity is likely to tighten further and put even more upward pressure on rates.
- Cleveland outbound tender rejections are down 132 basis points (bps) w/w, but are likely to rise in the coming days as outbound volumes surge.
What does this mean for you?
Brokers: Cleveland tender rejections are down 132 bps w/w, but with outbound volumes increasing 11% w/w and the Headhaul Index increasing 25% w/w, rejections are likely to rise in the coming days. Make sure your operations team is aware of the coming upward pressure on rates and be sure to prioritize your existing outbound Cleveland lanes since capacity is likely to tighten in the coming days on those lanes.
Carriers: If outbound volumes in Cleveland continue to increase, then it is likely that outbound tender rejections will increase and put significant upward pressure on spot rates, which have fallen quite a bit since their highs at the beginning of the year. Since upward pressure on spot rates is expected to increase in the coming days, stay firm on your rates from Cleveland to Atlanta and be sure to push them higher if rejections start to increase.
Shippers: Your shipper cohorts are currently averaging three days in tender lead times, which is likely not going to be sufficient as market conditions in Cleveland begin to tighten. With the expected upward pressure that is likely to be put on spot rates, it would be wise to make sure that you push your tender lead times above three days to ensure you are getting this lane covered.
It has become increasingly clear from SONAR data that the domestic truckload market is headed for a major demand-driven correction akin to what the industry experienced in 2019.
One question that arises from that thesis is how will that impact domestic rail intermodal. I believe it could have a positive impact on volume before it has a negative impact. An initial drop in demand could actually improve intermodal volume because congestion has been one of the primary volume constraints in recent months. As fewer containers are processed at ports and in intermodal terminals, delays should become less common and intermodal service should become more “truck-like.”
But once rail network fluidity has improved to an acceptable level (service levels that are consistently “truckload plus one day” or domestic intermodal companies turning their equipment closer to two times per month), intermodal volume will have no place to hide from the drop in freight demand. Much of what moves in intermodal containers is the same retail and home goods that consumers will cut back on as they look for ways to compensate for inflation in the price of essentials. A weaker truck market will also create greater modal competition for the same domestic loads that would otherwise move via rail intermodal. A softer truckload market will impair domestic intermodal carriers from increasing their prices. Earlier this year, it seemed likely that domestic intermodal rates could rise by double digits in 2022 (on top of double-digit rate increases last year). Now, weak freight demand in March makes that less likely.