SONAR sightings for Nov. 23: LA to Chicago, rail intermodal, more

Highlights

• Elizabeth outbound volumes are up 7% 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 28% w/w, signaling the capacity is likely becoming increasingly imbalanced.
• The Port of NY/NJ has been handling record volumes for the last few months, so outbound volumes are likely to remain high through the end of the year.

What does this mean for you?

Brokers: The Port of NY/NJ has been handling record import volumes for the last few months. This has caused a delay in the transition of this inbound containerized freight from overseas into actual truckload volumes. For that reason, it is reasonable to expect that there is still a significant amount of pent-up truckload demand that is likely to keep volumes elevated through the end of the year. Expect this elevated volume to put a strain on available truckload capacity, and in turn, upward pressure on spot rates.  

Carriers: Stay firm on your rates as pricing power in the Elizabeth market is highly likely to shift further in your favor in the week ahead. Outbound volumes have been close to all-time highs for the last couple of weeks, and they could move even higher in the coming days. Expect there to be significant upward pressure on spot rates this week that could remain elevated through the end of 2021. 

Shippers: Get your lead times to 4 days if possible. The near-record demand for truckload capacity is likely to put significant upward pressure on rates, so understand that capacity outside of your network will come at a premium for much of the remainder of the year, but especially this week in the run up to “Black Friday.”

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LOS ANGELES to CHICAGO

Overview: Domestic intermodal volume hits its highest level since February.

Highlights

• As is typically the case, tender rejection rates are rising on outbound L.A. loads ahead of Thanksgiving. In the L.A. to Chicago lane, van tender rejection rates rose from 16% in the second week of November to a current rate of 20%. 
• The current door-to-door domestic intermodal spot rate is $3.94/mile, including fuel surcharges. That rate is uneconomic when compared to current dry van spot rate data in SONAR Market Dashboard which shows an average rate of $3.50/mile, including fuel, and a “high rate” (67th percentile) of $3.74/mile, including fuel.   
• Domestic intermodal volume in the lane has risen to its highest level since February as congestion eases somewhat, at least in the domestic intermodal segment. 

What does this mean for you?

Brokers: Rates your rates in the lane to reflect the added difficulty of sourcing outbound L.A. highway capacity near the holiday. When negotiating with carriers, stress Chicago’s attractive Van Headhaul Index of 49.6 which means it should be easy for carriers to get reloaded once in Chicago.  

Carriers: Accepting a load in this lane would interfere with a driver’s Thanksgiving plans, but for those that don’t care, there is more of a chance to haul a highly-rated spot load given the rising tender rejection rates. Taking a load to Chicago would put you in a Headhaul market (the Chicago Van Headhaul Index is currently 49.6) with a van tender rejection rate that is only 66 basis points below the national van tender rejection rate.   

Shippers: Domestic intermodal shippers with established intermodal contracts in place are more likely to have those contracts honored as domestic intermodal volume in the lane rises. Spot shippers are better off using the highway given the still-elevated domestic intermodal spot rates and may want to wait until after Thanksgiving to move those loads when more capacity should be available.   

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SALT LAKE CITY to LOS ANGELES

Overview: Reefer rejection rates hit eight-month high out of Salt Lake City.

Highlights:

• Reefer outbound tender rejection rates have increased from 25% in August to over 55% currently with a 10 percentage point rise occurring in November—their highest point since March. 
• Average spot rates for reefer loads from Salt Lake City to Los Angeles have increased from $2.87 on November 10 to $3.46 per mile this week according to FreightWaves TRAC. 
• Los Angeles’ reefer outbound tender rejection rates pushed back above 40% late last week, but are nowhere near their spring and summer highs above 50%. 

What does this mean for you?

Brokers: Make covering Salt Lake City reefer loads a priority. If spot rates are on the rise moving into a favorable Los Angeles environment, then capacity will be a real challenge in this market. Pad your margins even in the most reliable lanes. 

Carriers: Reefer carriers should accept more loads into Salt Lake City, knowing there will be increased activity at high margin coming out of the area. Reefer rejection rates have risen significantly over the past few months indicating a long running trend of tightening. 

Shippers: Expect for reefer loads to fall into the spot market out of Salt Lake City. Rates increasing rapidly on the spot market in this lane are an indication of pure lack of supply in the market. Max out lead times when possible.

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Watch: Carrier Update

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Focus on … rail intermodal

By Mike Baudendistel, SONAR Market Expert

For those interested in the rail industry, I encourage you to read the FreightWaves article on RailTrends, a top-tier conference focused on the freight rail industry. The article has some great quotes on rail intermodal from Larry Gross, the president and founder of Gross Transportation Consulting.

According to Gross, rail intermodal posted its lowest share of freight movement in the third quarter in almost 12 years. In addition, intermodal has given back all of the market share gains it has achieved since 2009. Far from being a relief valve for a tight truckload market, railway network imbalance issues, equipment shortages, port and terminal congestion and labor shortages have all contributed to intermodal congestion. 

Fortunately, domestic truckload-based intermodal providers Schneider National and Hub Group both reported an improvement in railway fluidity on their respective third-quarter earnings calls. In addition, I view the recent increase in daily domestic intermodal volume in November (up 2% from October and up 10% from August-September) as evidence of a partial alleviation in intermodal network congestion.    

Refrigerated remains the most challenging truckload mode for shippers. Refrigerated carriers are being less compliant than carriers in other segments of truckload, rejecting 39% of tendered loads compared to dry van and flatbed carriers, which are rejecting 20% and 28% of tendered loads, respectively. Refrigerated freight seasonality is more extreme than other modes and, so far, there is little evidence that refrigerated capacity will loosen next year.   

This post originally appeared in The Stockout, a free newsletter focused on CPG supply chains. Please click here to sign up.

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Watch: Shipper Update

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Spotlight on … capacity trend reefer map

By Zach Strickland

Southern California and the Pacific Northwest continue to be challenging environments for refrigerated shipping, according to the capacity trend score map.

Dark blues indicate where the biggest shortages of capacity exist in the U.S.

While the midwestern markets continue to show consistently tight, markets like Salt Lake City and Ontario are tightening even more as we approach Thanksgiving.

The capacity trend scores measure capacity conditions in a market relative to itself based on either a 52- or 4-week timeframe. Higher values indicate relative tightness for the specified time period while lower values indicate relatively loose conditions for the market.

Viewing these scores on a map will help you identify what markets deserve more attention.    

Watch: Will spot markets remain flat this week?