SONAR sightings for Nov. 9: Phoenix to LA, intermodal focus, more

Overview: Average dry van carrier rates decline to $1.65 all-in rpm on the PHX–LAX lane.

Highlights:

• Dry van carriers averaged $1.65 all-in rpm last week on the PHX – LAX lane, but additional capacity has built up in the market as inbound trucks outnumber outbound loads.
• Dry van carriers averaged $4.56 all-in rpm last week on the LAX – PHX lane as capacity issues continue to plague Southern California markets. 
• Phoenix shippers increased dry van tender lead times to 2.18 days, which is still well below the national average of 2.60 days.

What does this mean for you?

Brokers: Brokers should search the spot market for loads that run across the PHX–LAX lane, but expect shippers to push your rates down on the lane. There is a surplus of trucks in the Phoenix market looking to shift to the Los Angeles or Ontario markets, which has loosened capacity on that lane. When searching for capacity, search for Phoenix-based carriers first, and push their rates down to create margin. Phoenix-based carriers can take advantage of the $4.56 all-in rpm average return rate, which might entice them to reduce their rates on the PHX – LAX lane. 

Carriers: Dry van carriers with trucks inbound into the Phoenix market need to plan ahead and search the spot market for loads that deliver into the Los Angeles market instead of moving your truck empty on the lane. Accept what you are offered on the lane, which should allow you to break even, or clear a small margin on the load. Los Angeles and Ontario markets are the hottest markets in the nation. Multiple lanes are averaging $4.00-plus all-in rpm out of the Southern California markets, and shippers might pay a lot more for on-demand capacity.     

Shippers: Phoenix shippers need to keep downward pressure on carrier rates as a surplus of dry van equipment builds in the market. The Phoenix dry van Headhaul score has declined to -121.86, indicating there are many more trucks inbound into the market than outbound loads. If you are shipping freight into the Los Angeles market, search the spot market for capacity, and push rates down near $1.00 rpm to start negotiations.

ELIZABETH (New Jersey) to CHICAGO

Overview: Rejections may be down week-over-week, but outbound volumes are likely to hit even higher all-time highs before the end of November.

Highlights:

• Elizabeth outbound volumes are up 3% week-over-week (w/w), but with maritime import volumes hitting a new all-time high for daily volumes, demand is likely to surge higher.
• Elizabeth’s outbound tender rejections are down 338 basis points (bps) w/w, but outbound volumes and maritime import volumes hitting record highs could cause that trend to reverse.
• The Port of NY/NJ has hit a new record high in daily volumes, and is likely to continue hitting new record highs between now and the end of the month.

What does this mean for you?

Brokers: The import volumes pouring into the Port of NY/NJ are currently at record levels, and that trend is expected to continue. Any shippers who still have freight in those ocean containers that is needed for the holidays will be looking to expedite those shipments as soon as possible, which is likely to cause significant upward pressure on spot market rates. This is true at almost every major port in the U.S., so expect that the port-side truckload markets are likely to be some of your tightest conditions in the weeks leading up to the holidays.

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 are positioned to surge in the weeks ahead and will likely extend beyond their recent record highs. This increase in demand is likely to cause a significant tightening in capacity in the Elizabeth market, but it is possible that the upward pressure on spot rates will be much higher due to the time-sensitive nature of many of these containers.

Shippers: The record highs we have recently seen at nearly every major port in the U.S. is not over yet. Instead, it is highly likely that spot rates will rise at an even faster pace between now and the holidays, even if outbound tender rejections do not surge alongside volumes. If you are in the Elizabeth market with outbound volumes to move, you should push your tender lead times between 3 and 4 days as soon as possible. Conditions are likely to get worse from now through at least the end of November (but possibly through Christmas).

MEMPHIS to COLUMBIA (South Carolina)

Overview: Memphis outbound rejection rates fall back to Earth.

Highlights:

• Memphis’ outbound rejection rate fell from 32% on October 31 to 27.4% to start this week while demand appears to be easing.   
• Rejection rates to Columbia have also fallen dramatically over the past week, but are now well below the Memphis market average.  
• Columbia is in a strong easing pattern with rejection rates falling below 20% for the first time since July and volumes are also steadily moving downward.  

What does this mean for you?

Brokers: Expect easing conditions in this lane in terms of contract compliance this week. Rates may still feel a bit of upward pressure due to the fact that one in four loads is still being rejected, but this is the loosest this lane has been since early August.    

Carriers: Do not plan on as much reload potential out of Columbia this week for either spot or contracted freight. Rejection rates are still high, but dropping steadily. Tender volumes are also falling. At this point there is no sign of holiday surges at the origin or destination of this lane. 

Shippers: Expect better contract compliance this week in this lane. If you are still experiencing compliance levels below 70%, consider offering short-term increases to get through the holidays.

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Spotlight on … Intermodal volumes

By Mike Baudendistel, Rail/Intermodal Market Expert

SONAR intermodal volume data suggests that intermodal network fluidity is improving, at least in the domestic intermodal segment. While still constrained by congestion and with volume still below year-ago levels, domestic intermodal volume in the past week is up 10% from average volume in August and September. 

The chart below also shows that domestic intermodal volume improvement has been widespread (not just a function of more transloading near the ports) and has increased month-over-month in nine of the 11 densest lanes. That data is consistent with comments made by truckload-based domestic intermodal companies Schneider National and Hub Group last week, which indicated that rail network fluidity has improved. 

As network fluidity has improved, domestic intermodal volume increased month-over-month in nine of the 11 densest domestic intermodal lanes.

It’s worth pointing out that there hasn’t been a similar rise in international intermodal volume (which consists primarily of 40’ containers and was down 4.2% in the most recent week from the August-September average), due to congestion at/near ports, a shortage of chassis and container ship companies’ reluctance to send international containers inland. This has led to more transloading of imports from 40’ containers into 53’ containers, as well as more truckload movements and more imported goods delayed near the ports.  

International intermodal volume has been trending downward in recent months. However, loaded international intermodal volume has risen in most of the headhaul lanes in the past 30 days, which may indicate that a broader rebound is forthcoming.  

Domestic intermodal volume outbound from L.A. has risen, while international intermodal volume outbound from L.A. has fallen sharply. This is due to a combination of more transloading and congestion having a greater impact on international intermodal.

Intermodal spot rates are higher y/y in all of the densest domestic intermodal lanes with the exception of L.A. to Atlanta. That’s important because it sets up domestic intermodal contracts for another year of meaningful rate increases.

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Focus on … Dry Van indices

By Zach Strickland

The national average for dry van outbound tender rejection rates has declined to 18.47%, but spot rates for on-demand capacity remain elevated across the nation.

Dry van freight volumes have increased slightly to 11,111.54 index points, indicating a high demand for dry van equipment as shippers ramp up efforts to move their goods before the holiday season.

Shippers in the Cape Girardeau, Omaha, Sioux Falls, Des Moines, Cedar Rapids, Dubuque, Mobile and Duluth markets are struggling with dry van rejection rates over 35%, and those rates are over 25% in the Rock Island, Memphis, Montgomery, Nashville, Birmingham, Bowling Green, Jefferson City, Shreveport, Denver, Evansville, Tifton and Wilmington markets.

Carriers will find the most opportunities for dry van freight in the Ontario, Atlanta, Harrisburg, Elizabeth, Dallas, Los Angeles, Houston, Joliet, Indianapolis, Columbus, Allentown and Charlotte markets, which are the largest dry van markets by volume in the nation at this time.

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Register for November 2021 Market Update

FreightWaves’ monthly Market Update webinar is our most popular monthly segment designed to provide data around the latest events affecting the freight markets today. Based on real-time intelligence, we will be exploring current economic factors and freight trends to help you and your company plan for the future.

Presented in partnership with CarrierDirect, this webinar will feature insights from FreightWaves’ Director of Freight Market Intelligence, Zach Strickland, and Lead Economist, Anthony Smith, who will also be prepared to answer your questions during the live audience Q&A. The webinar is scheduled for Nov. 17.

Topics for November include:

• Employment momentum
• Shift in trends
• Warehouse capacity
• Inventory challenges

Register for this important update to hear about the current state of the industry and how you can prepare for the future based on the latest data available.

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