The highlights from Wednesday’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: Houston to Jacksonville
Overview: Houston’s outbound rejection rate tops 8%.
Highlights:
- Spot rates in this lane have been flat to slightly down over the past month with a relatively narrow range of reported rates averaging just above $2,600 all-in.
- Houston’s outbound rejection rate has hit its highest point in nearly a month with a value of 8.3%.
- Jacksonville’s outbound tender rejection rate continues to climb higher, pushing over 13% after being at 9% two weeks ago.
What does this mean for you?
Brokers: Keep an eye on this lane for increasing volatility as implied by the jump in the tender rejection rate. Jacksonville has become a relatively strong destination market, which should keep carriers’ interest steady in this lane. Use this to keep rates under control.
Carriers: Prioritize coverage of this lane out of Houston as Jacksonville capacity has been tightening for two weeks. With the holiday approaching, things are not expected to improve.
Shippers: Watch for service deterioration out of Houston this week. Expect to pay around $2,600 or higher all-in on the spot market if your contracted carriers are not available.
Watch: Carrier update
Lane to watch: Des Moines, Iowa, to Cape Girardeau, Missouri
Overview: Des Moines records its second-highest spot rates for the month.
Highlights:
- The Des Moines outbound tender rejection rate is more than double the national average at 21.42%, indicating there are significant capacity constraints and inflated spot rates.
- Spot rates are up overall for the past 30 days but just under 30-day records at $3.38 per mile.
- Cape Girardeau continues to be the market with volatility to rival that of a yo-yo. Swings of 10 basis points within a week have been all too common throughout May.
What does this mean for you?
Brokers: The volatility of Cape Girardeau makes for a risky challenge. Priority coverage on this lane is paramount as rates could spike, capacity could tighten further and coverage could become even more unreliable than it already is. An all-in rate of $1,527 should do well to secure a shipment with two and a half to three days of lead time.
Carriers: Capacity in Des Moines is loosening, but outbound tender rejection volumes are still more than double the national average. Rates are inflated for this market and will continue to be throughout the peak of agricultural shipping season. Hold firm on rates, and put upward pressure on the spot market.
Shippers: Outbound tender lead times to ship anything from Des Moines should be set at a minimum of three days. Capacity is tight out of Des Moines, making it difficult to cover loads at times. Knowing rates will be higher than average on this lane will affect the transportation spend, but utilizing other, more cost-effective lanes can help balance that out.
Retail sales were updated last week and showed an increase of 0.9% for April. The upward movement on the surface seems like good news, but it is reported in millions of dollars. Ongoing inflation means that the rise in retail sales doesn’t necessarily mean more purchases or a robust consumer. Industrial production increased as well, up 1.1% for the month, and will continue to feed into flatbed volumes (although the rate of growth is easing). Tender rejections for flatbed trailers will continue to moderate but perform better than dry van and reefer in the coming weeks. Housing starts eased 0.2% for the month, but the other measures such as units under construction were up 24.1% y/y, and units authorized but not started were up 18% y/y, indicating that there are still many units to be built as new activity eases. There was likely a pull-forward in starts earlier this year to get ahead of the expected rise in mortgage rates. Starts will likely moderate and ease in the coming months.
Durable goods orders, personal consumption expenditures and initial jobless claims will be updated in the coming week. New orders will signal what level of production is down the line. However, shippers and producers of durable goods will be in a difficult position as consumers continue to shift to spending on services, and inventory costs are still elevated. Having the right inventory on hand will be paramount for protecting profitability. If producers are caught off guard, it can lead to a decline in job openings and a more rapid shift in consumer behavior going into the latter half of the year.
