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SONAR sightings for March 18: Chicago to Atlanta, shipper update, more

The highlights from Friday’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: Chicago to Atlanta

Overview: Domestic intermodal volume hit its highest level in the past year as carriers protect intermodal capacity for contracted shippers. 

Highlights:

  • The average spot rate that brokers are paying for dry van capacity has declined 5% in the past month to an average of $4.06/mile, including fuel surcharges.  
  • Meanwhile, the average intermodal spot rate to move 53-foot containers door to door increased 2.2% in the past month to $3.84/mile, including fuel.   
  • Domestic intermodal volume in the lane hit its highest level in the past year with an average of 308 loaded containers moving daily in the past week. 

What does this mean for you?           

Brokers: Brokers may want to cut their bids slightly to preserve margins given the downward trajectory of dry van spot rates in the lane. When negotiating with carriers, brokers should keep in mind that the average rate that other brokers are paying for dry van capacity in the lane according to FreightWaves TRAC is $4.06/mile with $4.33/mile and $3.81/mile representing rates in the 67th and 33rd percentiles, respectively. All rates include fuel surcharges.  

Carriers: When intermodal spot rates are priced close to dry van spot rates, highway carriers will likely not face any meaningful competition from intermodal for spot loads. But a falling van tender rejection rate in the lane means that there will be fewer spot loads available for carriers. Meanwhile, heading to the Atlanta market is a mixed bag for carriers; the Atlanta market is not as tight as most, but it remains a headhaul market.  

Shippers: As domestic intermodal volume hits its highest level since last spring, intermodal service levels have improved for shippers with contracts in place. Meanwhile, the 5% spread between door-to-door intermodal and dry van spot rates is probably not enough to entice many spot shippers to use rail intermodal. 


Watch: Shipper Update


Lane to watch: Columbia, South Carolina, to Houston

Overview: Spot rates rise as tender rates fall; carriers seek higher rates to offset lower outbound load volumes in Houston. 

Highlights:

  • Spot rates increased this past week from $2.51/mile to $2.58/mile, as declining tender rejections and outbound load volumes decreased. 
  • Outbound tender rejections from Columbia to Houston fell from early March highs of around 18.5% to 10.16% as the Columbia market fell from 20.5% to 12.70%. 
  • Columbia outbound tender volumes edged downward from around 140 bps in early March to 127.07, while Houston outbound tender volumes decreased from around 325 bps in early March to 292.51 currently.

What does this mean for you?

Brokers: Freight volumes appear to be decreasing in both markets (possibly due to rising fuel costs), forcing many shippers to reduce volumes against the backdrop of rising transportation spend. The upward movement in spot rates over the past week appears to be influenced by these falling outbound tender rejection and volume levels, with the Columbia to Houston lane presenting an opportunity to push down rates and increase margins. 

Carriers: The declining outbound tender volume and rejection levels will put greater pressure on tender compliance but also may result in fewer loads tendered, putting greater stress on finding replacement loads if volumes continue to decline. The recent upward movement in spot rates appears to be correlated with the falling load volumes out of Houston, as carriers seek higher rates to offset the lack of outbound freight options. 

Shippers: Declining tender volumes and subsequent better tender compliance should benefit shippers whose contracted rates for these lanes remain below spot market levels. The biggest challenge will be the impact of the fuel surcharge and the resulting load volume decisions that must be made. Some shippers may forgo extra shipments until the fuel situation improves, while others may take the lower tender decline ratios as an opportunity to catch up on inventory replenishment. Outbound tender lead times from South Carolina decreased from around 2.875 to 2.660 in the past week, indicating shippers in the market are betting on lower rates and tendering loads sooner.    


Watch: Carrier Update


Lane to watch: Nashville, Tennessee, to Elizabeth, New Jersey

Overview: Rejections are likely to increase further as the Headhaul Index and outbound volumes increase w/w.

Highlights:

  • Nashville outbound tender volumes are up 3.5% w/w, signaling that demand for outbound capacity is increasing.
  • The Headhaul Index in Nashville is up 7% w/w and is likely to increase further. This will turn Nashville into a headhaul market; it is likely to remain that way throughout peak season.
  • Nashville outbound tender rejections are up 3% w/w, signaling that the increase in outbound volumes has likely already caused a significant tightening in capacity. 

What does this mean for you?

Brokers: Nashville tender rejections are up 3.5% w/w and are currently over 4% higher than the national average. With outbound volumes increasing 3% w/w – pushing the Headhaul Index up 7% w/w – it is likely that there is significant upward pressure on rates, so capacity is also likely to get even tighter in the coming days. Be sure to account for the upward pressure on spot rates when pricing new opportunities and prioritizing coverage on your existing loads.

Carriers: Stay firm on your rates because there is significant upward pressure coming from both a decrease in supply and an increase in demand w/w. Outbound tender rejections have already increased over 3.5% w/w, and with the Headhaul Index increasing 7% w/w, pricing power is likely to shift even further in your favor for outbound Nashville lanes. Keep an eye on outbound tender rejections; if they continue to rise, you can likely push your rates higher as well.  

Shippers: Your shipper cohorts have increased lead times significantly w/w, and are currently averaging 2.8 days. With outbound tender rejections on the rise – as well as outbound volumes and the Headhaul Index – you will likely need to push tender lead times closer to four days to protect your company from at least some of the upward pressure being put on rates and causing capacity to tighten.