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: Dallas to Columbus, Ohio
Overview: Rates are back on the climb after being relatively flat through April.
Highlights:
- Average spot rates have increased 3% over the past week in this lane with high- and low-end values also moving higher.
- Tender volumes have stabilized while rejection rates continue to fall out of Dallas, indicating there is the potential for increasing overall demand.
- Rejection rates are nearly 2 percentage points higher (at 7.6%) in this lane than the general Dallas market, indicating it is one of the more difficult lanes to cover out of the market.
What does this mean for you?
Brokers: Increase rate expectations in this lane. There are early signs that Dallas may be seeing some seasonal demand increases leading into the summer. This lane should be one of the highest priorities along with other Northeastern destinations.
Carriers: Make sure you’re aware of upward pressure on rates in the spot market in this lane. Keep tabs on how much more activity you are getting from shippers out of the Dallas market as you may find yourself out of balance.
Shippers: Make covering Dallas loads a higher priority this week while tender volumes are moving sideways and rejection rates are moving lower. This could lead to a reversal of easing in this market.
This past week, China’s leader, Xi Jinping, issued one of the strongest statements to date regarding the government’s commitment to its “zero-COVID” policy. In a meeting of the Communist Party’s supreme Politburo Standing Committee, he vowed to “adhere to the general policy of ‘dynamic zero-COVID’ and resolutely fight against any words and acts that distort, doubt or deny our country’s epidemic prevention policies.” This statement all but confirms that these policies will likely continue for at least another month to two months, and thus, will continue to cause major disruptions to supply chains dependent upon Chinese production and/or domestic logistics operations inside the Chinese mainland. Already, we are seeing delays mounting once again in the transit time data from project44 of vessels traveling between Shanghai and major European ports and U.S. ports. While some factories have been allowed to resume operating, there are still an estimated 8 million people on full lockdown. Not to mention that there are still significant disruptions in many of the supply chains of those factories that are not able to secure trucking capacity for much needed components utilized in the manufacturing process.
While the Chinese government remains steadfast in its commitment to the current COVID policies and restrictions, their dependence on containerized exports could potentially lead them to ease restrictions by late June/early July as U.S. importers inevitably will begin preparing for peak season volumes for the holiday season. But this is just a hope for now, and it is important to realize that it is simply unknown exactly how long the Chinese government will keep these measures in place. The most current data shows that new bookings for ocean containers have declined dramatically over the past two weeks, and are now signaling that, even with the ports fully operational, volumes are likely to see major declines at least for the next few weeks. At this pace, even if China opens up fully in the next few weeks, the U.S. and other major importers of Chinese exports may have slipped further into recession territory, so it is largely unknown how much of a volume surge we will see if China fully reopens other than what is to be expected as typical peak season volumes.
Lane to watch: Elizabeth, New Jersey, to Chicago
Overview: Rejections are likely to rise as the Headhaul Index surges 40% w/w.
Highlights:
- Elizabeth outbound volumes are up 11% w/w, but with maritime import volumes hitting a new all-time high for daily volumes, demand is likely to surge higher.
- Elizabeth’s Headhaul Index has increased over 40% w/w, signaling the capacity is likely becoming increasingly imbalanced.
- Outbound tender rejections in Elizabeth are relatively flat w/w (-97 basis points, or bps), but are likely to move higher as the Headhaul Index surges.
What does this mean for you?
Brokers: The w/w change of 40% in the Headhaul Index is likely to cause a tightening of capacity that should put a significant amount of upward pressure on spot rates. This growing imbalance in the Elizabeth market is being primarily driven by a 11% increase in outbound volumes w/w. If this trend continues, we should see outbound tender rejections increase by at least a few percentage points. Get this lane prioritized for coverage, and be sure to let your team know about the upward pressure on spot rates that is expected.
Carriers: Elizabeth pricing power is likely to shift even further in your favor in the coming days due to a growing imbalance between inbound and outbound volumes. With an increase of 40% w/w in the Headhaul Index, you should seek to capitalize on this major imbalance between inbound and outbound volumes. Keep an eye on outbound tender rejections, and if they continue even higher w/w, then you are likely to see significantly more upward pressure on spot rates.
Shippers: Your shipper cohorts in Elizabeth are still averaging 2.9 days in tender lead times, but history shows that when capacity tightens quickly in Elizabeth, lead times should be between 3.5 and four days to help relieve some of the pressure being put on capacity and spot rates.
Capacity seemed to somewhat stabilize this past week as national rejection rates found a floor around 8.5%. Tender volumes rose before falling back slightly at the end of the week, indicating little change in demand. Looking into regions, there is a pretty wide range of dispersion in contract compliance. Midwestern regional rejection rates led the way with a 12% figure, while the West Coast, which includes the Southern California markets, had the best compliance with a value around 3%.
The takeaway here is that carriers are well supplied out West and still have room to improve on the East Coast. Contract rates have more than likely risen disproportionately, with higher values coming out of LA than many areas. Short-haul demand has grown out of the nation’s largest outbound center. This means carriers may find themselves stuck moving intra-warehouse moves in California as long-haul demand has waned. It is still hard to determine what direction this market will go with so many variables in fluctuation. Continue to monitor volumes and rejections for the earliest signals of trend changes.
