The highlights from Monday’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.
Lanes to watch
By Zach Strickland, director, Freight Market Intelligence
LOS ANGELES to ATLANTA
Overview: Spot rates in Market Dashboard show that spot shippers are better off using the highway rather than rail intermodal.
Highlights
- The current dry van spot rate in SONAR Market Dashboard is $3.73/mile, including fuel surcharges. Given the high density of data from loads with similar characteristics, it has a lane confidence score of 5/5.
- Meanwhile, the door-to-door intermodal spot rate in the lane is $4.18/mile, also including fuel surcharges. Therefore, spot shippers have no reason to use rail intermodal in the lane.
- The van tender rejection rate in the lane is 19.1% which is roughly in line with the national van tender rejection rate and is 370 basis points higher than the rejection rate for all outbound Los Angeles van loads.
What does this mean for you?
Brokers: Loads in this lane may be harder to cover immediately following the Thanksgiving weekend as capacity gradually heads back to the Los Angeles market. Therefore, prioritize covering loads in the lane this week. When bidding on capacity, keep in mind that the current TRAC/Market Dashboard buy rates, including fuel, are a range of $3.40/mile to $3.74/mile, for rates in the 33rd and 67th percentiles, respectively, with an average spot rate of $3.53/mile.
Carriers: Before accepting tendered loads to Atlanta, carriers may want to look for loads to a tighter freight market. The Atlanta van outbound tender rejection rate of 19.36% is 343 basis points below the national van tender rejection rate. SONAR shows that the Atlanta freight market is roughly balanced with inbound and outbound demand; the Atlanta Van Headhaul Index is -4.
Shippers: Prior to Thanksgiving, domestic intermodal volume in the lane reached its highest level since February, which suggests that intermodal shippers with contracts in place are more likely to see satisfactory service levels. Spot shippers should use the highway rather than rail intermodal in light of the elevated intermodal spot rates.
COLUMBIA (South Carolina) to HARRISBURG (Pennsylvania)
Overview: Spot rates for reefer loads jumping out of Columbia.
Highlights
- Spot rates for refrigerated loads have increased 30 cents per mile since last Wednesday in this lane.
- Columbia’s reefer outbound tender rejection rate increased from 40.37% on November 21 to 72.3% this past weekend.
- Harrisburg’s reefer outbound tender rejection rate has fallen from 25% on November 20 to 20% this past weekend.
What does this mean for you?
Brokers: Pad margins on loads moving in this lane. Expect tightening conditions for refrigerated loads out of the Columbia market. Make this lane a higher priority for finding coverage.
Carriers: Accept more refrigerated loads into the Columbia market. Capacity has tightened rapidly for reefer equipment in the Carolinas. Harrisburg is easing but rejection rates are still over 20%, meaning capacity is loose only relative to other regions of the U.S.
Shippers: Increase lead times for refrigerated loads in this lane. Check with all your scheduled carriers who have loads scheduled to pick up out of the Carolinas this week to ensure pick-ups are still covered.
HOUSTON to MEMPHIS
Overview: Capacity is likely to tighten further in the days ahead as the Headhaul Index surges over 38% week-over-week (w/w).
Highlights
- Houston outbound volumes are down 19% w/w, but are likely to surge in the days ahead as weekly import volumes just smashed the Port of Houston’s all time record.
- The Headhaul Index in Houston is up 38% w/w, and is likely to move higher in the coming days as outbound volumes are likely to explode in the days and weeks ahead.
- Houston outbound tender rejections are relatively flat w/w, but are likely to increase rapidly in the coming days due to the increasing imbalance between inbound and outbound volumes.
What does this mean for you?
Brokers: Outbound tender rejections may be relatively flat w/w, but with the Headhaul Index increasing 38% w/w we are likely to see rejections move higher in the coming days. Outbound volumes have declined 19% w/w, but since inbound volumes have decreased at a faster rate, the growing imbalance between inbound and outbound volumes is likely to cause capacity to tighten further in the coming days.
Carriers: Stay firm on your rates, and expect upward pressure to persist on spot rates due to the large increase of 38% w/w in the Headhaul Index. With import volumes having been at, or near, record highs for most of 2021, we should still see a significant amount of outbound volumes to continue moving out of the Houston market through the end of the year.
Shippers: Your shipper cohorts in Houston have been steadily increasing tender lead times over the last few weeks, and currently lead times in Houston are averaging 3.6 days. While this lead time is nearly a record for 2021, it would be wise to push them out even further to between 4 and 4.5 days to help alleviate some of the pressure that is likely to be put on capacity from the massive 38% increase w/w in the Headhaul Index.
Watch: Transportation Update
Historic decline in commodity diesel price
By John Kingston
The decline in the price of ultra low sulfur diesel (ULSD) on the CME commodity exchange Friday was historic.
Oil and equity markets fell broadly on fears of the economic impact of the new coronavirus variant. And in the case of the ULSD market on CME, the most basic building block for determining the ultimate retail price of diesel, its decline was one of the largest in the history of the contract going back to 1980.
ULSD on CME dropped 28.85 cents a gallon Friday, to settle at $2.0945. Excluding a few technical moves that are quirks of big movements when one trading month goes off the board, the decline was the second largest in the history of the contract. (The current ULSD contract had been a heating oil contract before the technical specifications of diesel and heating oil aligned through environmental regulations, and the price history of the contract is considered contiguous. Both heating oil and diesel are middle distillates.)
While it is too early to know what the reaction of wholesale markets will be to the decline, the reality is that wholesale prices need to stay competitive with prices sold through wholesale distribution channels but on formulas tied to spot prices. Given that, the size of the drop in wholesale levels will generally track broader market moves.
Wholesale prices have been swinging fairly widely in the last month. On October 27, the national average retail price per the ULSDR.USA data stream in SONAR was $2.688/gallon. By October 27, it had decline to $2.496/g before rising to $2.58/g Friday.
For more details and analysis on this topic, click here for the full report.
Watch: Supply Chain Update
Truckload length of haul increasing
By Zach Strickland
Demand for longer-haul capacity has grown significantly over the past five months, driving the average length of haul for truckload tenders 10% higher. An unseasonal increase in this index is indicating shippers are seeing easing demand at the personal consumption level, are still trying to build inventories or both.
The Outbound Average Length of Haul index (OALOHA) measures the average distance between the origin and destination of a truckload request from a shipper. Shorter lengths of haul favor upstream or raw material moves in the manufacturing cycle of the supply chain and order fulfillment closer to consumption in the retail sector.
Longer lengths of haul are indicative of inventory replenishment, either of raw materials on the manufacturing side or of finished goods on the retail side. It is typical to see greater lengths of haul in early spring and early fall as shippers import goods for the major consumption and production seasons during the summer months and leading into the winter holidays.
For more details and analysis on this topic, click here for the full report.
Focus on … Reefer Outbound Tender Reject index
By Zach Strickland
The Reefer Outbound Tender Rejection Index (ROTRI) weekly change map shows dramatic tightening in the Carolinas this week for refrigerated capacity.
The epicenter of this action is located in the Columbia, South Carolina, market where rejection rates for reefer loads have hit their highest values since July 4.
The Pacific Northwest and West Coast regions continue to show challenging conditions as well, coming out of the holiday.
National reefer rejection rates have declined in aggregate over the past week, but its capacity remains the tightest of the big three trailer types.
Using the change indexes is a good way to identify areas where conditions have changed the most over time—weekly, bi-weekly, monthly, and yearly.