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SONAR sightings for March 21: Dallas to Philadelphia, weekly outlook, more

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 Philadelphia

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

Highlights:

  • Spot rates have fallen 21 cents per mile since Feb. 18 in this lane, but have stabilized at around $2.90 over the past week. 
  • Dallas’ outbound rejection rates have fallen from 15% to 12.4% over the past 10 days with rejection rates into the Northeast averaging over 3 percentage points higher. 
  • Philadelphia’s Outbound Tender Volume Index has risen about 3.5% since the start of March as rejection rates have declined from near 20% to 14.5%. 

What does this mean for you?           

Brokers: Target rates at or below $2.90/mile as rejection rates suggest continued easing, but do not get overly aggressive just yet with fuel costs putting pressure on lower-end rates.  

Carriers: Continue to accept loads in this lane as Philadelphia volumes are on the rise. Spot activity is diminishing nationwide so expect less help from the transactional space. 

Shippers: Expect better compliance in this lane this week, but do not reduce priority on this lane. Carriers are seeing less optionality in general, which should make procurement easier, but carriers will still prefer to move in other directions. Keep lead times as high as possible into the Northeast. 


Despite lackluster volume the past few years, maybe intermodal is still a growth area after all. Last week, J.B. Hunt announced that it would expand its intermodal container fleet by 40% – to a whopping 150,000 units over the next three to five years. The purchasing plan is part of a joint initiative with BNSF, its Class I railway partner, to increase capacity in the marketplace to accommodate both current demand and expected demand growth in the next few years. The announcement comes after both Schneider and Knight-Swift announced that they would move their intermodal volume in the western U.S. from BNSF to competitor Union Pacific. Those moves echoed Hub Group’s similar move to Union Pacific more than a decade ago. Presumably, the moves by Schneider and Knight-Swift will free up rail capacity on BNSF that J.B. Hunt will be able to utilize as it serves its intermodal customers (which include retailers, consumer goods producers and other shippers). In SONAR over the next several years, expect that the expansion of J.B. Hunt’s container fleet to be most clearly seen in the domestic intermodal volume between LA and Chicago. That is the densest intermodal lane in the North American intermodal network and, far and away, the densest intermodal lane on BNSF. 

Another issue to watch, which could have a more immediate impact, is the labor showdown between Canadian Pacific and the Teamsters Canada Rail Conference. Canadian Pacific began a “structured shutdown” of its rail service across Canada after a breakdown in talks with the Teamsters union on Saturday led to a work stoppage by 3,000 train engineers, conductors and yard workers. The timing of a labor disruption could not be worse – the Canadian railroads are major haulers of agricultural commodities that compete with Russian and Ukrainian agricultural products that are being sanctioned and/or are unable to be exported due to logistical issues.


Watch: Carrier update


Lane to watch: Kansas City, Missouri, to Houston

Overview: Spot rates have stabilized after falling 7% in the past month as volumes and rejection rates decline.  

Highlights:

  • Spot rates fell 25 cents or about 7% in the past month – from $3.53/mile to $3.28/mile with the steep drop-off in spot rates occurring around early March. 
  • Kansas City outbound tender rejection rates have declined from around 29% to 22.16% in the past month, with Kansas City to Houston declining from 20% to 13.9% in the same period.
  • Kansas City outbound tender volumes declined from an early march high of 237 bps down to 212.9 bps in the past 30 days, suggesting the recent spot rate and tender rejection declines were influenced by the lower volume levels.

What does this mean for you?

Brokers: The Kansas City to Houston lane appears to be in higher demand due to a 8.26% percentage difference compared to the overall Kansas City market. This downward movement in rejections and recent 25 cents-per-mile decrease can open up opportunities to increase margin and push down rates due to recent volume declines. When quoting ad hoc opportunities, be aware of the current moderate lane volatility, as the range of potential rates can fluctuate between a high of $3.64/mile to a low of $3.11/mile, with the current rate on the lower end at $3.28/mile. 

Carriers: Recent spot rate and outbound tender rejection declines are moving in tandem with lower volumes, which could impact booking decisions if customers are unable to tender their entire weekly lane commitment. With most of the Kansas City market experiencing outbound rejections around 20% to 23%, customers will be much more sensitive to any tender declines from Kansas City to Houston, as capacity appears to favor this lane due to its over-performance at 13.9%.

Shippers: Compared to the greater Kansas City market, the lane to Houston appears to present an opportunity to push down rates and shore up overall tender compliance. The recent decline of 25 cents a mile should provide some savings. Recent declines in outbound tender lead times (from an early March high of around 3.770 days to 3.543 days) indicate other shippers are responding to falling rates and volumes by tendering later, as an increase in tender lead times indicate the potential for higher prices in the future.


Declining freight volumes are starting to have an impact on spot market prices. In the past 30 days outbound tender volumes declined 7.7%, while outbound tender rejection rates fell 13.3%. This downward movement has had a notable effect on spot market rates, with the Truckstop seven-day moving average declining 6.8% in the past month. While overall outbound load volumes declined 9% year-over-year (y/y), overall spot market rates remained elevated at over 10% y/y, indicating that while the spot market is declining, there is the potential for greater downward spot movement if this correlating trend continues. 
 
Trucking companies must identify load opportunities or increase tender acceptance rates to cover offset losses, as the scale of their operations require a favorable load-to-truck ratio for revenue goals. The first place they can use to hastily fill network gaps will be with spot market or ad hoc opportunities from shippers and brokers. The challenge will be remaining tactical in their load commitments, as the recent load volume volatility can potentially turn an underbooked internal market into an overbooked market, presenting service challenges when trucking capacity cannot cover the booked demand.


Watch: Shipper update

The FREIGHTWAVES TOP 500 For-Hire Carriers list includes J.B. Hunt (No. 4), Schneider (No. 7) and Hub Group (No. 29).