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SONAR sightings for March 29: Seattle to Chicago, import/export update, more

The highlights from Tuesday’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: Elizabeth, New Jersey, to Columbus, Ohio

Overview: Spot and rejection rates are in a free fall out of Elizabeth. 

Highlights:

  • Spot rates have fallen 40 cents per mile to $3.14 in this lane since March 2 but remain approximately 20 cents higher than where they were to start the year. 
  • Rejection rates have fallen from 17.3% on March 2 to 9.95% out of Elizabeth, making it one of the largest monthly declines in the country.  
  • Columbus’ outbound rejection rates have fallen nearly four percentage points to 15.8% since March 14. 

What does this mean for you?           

Brokers: Deprioritize this outbound market for finding coverage. Rates are falling rapidly with capacity easing. Rates may hit a floor as inflationary pressure from contract rates and fuel prices increase. Target rates below $3.10 per mile in this lane. 

Carriers: Take what you can get while you can get it, especially moving freight from Elizabeth to Columbus. Capacity is easing quickly, which will make reloading much more difficult out of the Elizabeth market. Columbus has started to ease more quickly as well, but it is still one of the tighter large markets in the U.S. 

Shippers: Expect compliance to improve quickly in this lane. If you have not noticed improvement, then look at your pricing to make sure it is not too far below the current spot rate. If you are in line, it is time to evaluate your providers in this lane. 


Watch: Shipper update


Lane to watch: Seattle to Chicago

Overview: An intermodal volume decline coupled with a surge in intermodal spot rates highlight a lack of available intermodal capacity.  

Highlights:

  • International intermodal volume declined 49% in the past month to an average of 114 containers/day. That mirrors the greater than 50% drop in maritime import shipments at the Port of Seattle from the beginning of March to the middle of March.   
  • Domestic intermodal volume declined 19% in the past month to 263 containers/day. 
  • The current intermodal spot rate is elevated at $4.88/mile, up from less than $2/mile at the start of the month. Meanwhile, the average dry van spot rate, according to SONAR’s Market Dashboard, is $2.42/mile. 

What does this mean for you?

Brokers: To preserve margins, brokers may want to reduce their bids in the lane. But with an average spot rate 3% below the month-ago level, brokers should also keep in mind that spot rates in the lane have not fallen as much as other highly trafficked lanes from West Coast origins to Chicago. 

Carriers: Normally an intermodal lane, there should be more highway loads available now given the lack of intermodal fluidity that has arisen in the past month. Chicago is a solid destination for dry van carriers currently, given that the Chicago dry van outbound tender rejection rate of 16.1% is 150 bps higher than the national rate and given that Chicago remains a headhaul market with a Van Headhaul Index of 33. 

Shippers: The increase in intermodal spot rates and the decline in intermodal volume suggest a lack of capacity and/or an increase in intermodal congestion in Seattle. So shippers with intermodal contracts should check to make sure shipments will arrive on time. Spot shippers should use the highway given the lack of available intermodal capacity. 


For the week ahead, container volumes from China to the U.S. will remain one of the most important metrics to monitor. The COVID-related lockdowns in China have many speculating that they could put significant upward pressure on rates. The lockdowns should cause a large backlog of shipments at some of the largest origin ports in China. While this is certainly a possibility, without a significant amount of consumer demand to keep those orders materializing into physical shipments, it is unlikely to have a massive impact on container rates and capacity. Currently, container volumes are positive 7% on a month-over-month (m/m) basis, but that is primarily because of the timing of Chinese New Year and the drop in volumes during that major national holiday in China. On a w/w basis, container volumes are up slightly at 5%, and on a year-over-year (y/y) basis they are down 23%. SONAR’s seven-day forecast indicates that these volumes are likely to drop further throughout the coming week, and by next weekend, there should be an additional drop of 10%-20% across w/w, m/m and y/y volumes. According to the Drewry World Container Index, container rates from Shanghai to Los Angeles have already dropped around $1,000 per 40-foot container since the beginning of March. So if volumes continue to stay negative y/y, and also begin to show negative signals on a w/w and m/m basis, we could experience a significant drop in container rates from now until volumes begin to pick up prior to what is typically considered peak season (July/August/September).


Watch: Carrier update


The slower growth expected to take hold upstream may be beginning now. The durable goods orders report showed a 2.2% decline in February. The subcomponent, nondefense capital goods excluding aircraft orders, or core capital goods orders, is used as a barometer for B2B activity and precedes industrial production activity. That core capital goods orders number moved down 0.3% in the most recent release. This isn’t a large drop-off and it’s only one month of downward movement, so it’s not a trend. However, it is an early sign that should be noted. Flatbed activity will remain tight and there will likely be more opportunities coming from the volatile defense spending and aircraft production segments in the coming weeks. New home sales ticked down 2% as well. The concerning trend doesn’t come from the downward movement, but out of the 771,000 (seasonally adjusted) homes sold, 359,000 are under construction, while another 209,000 have not been started. This shows the backlog for building products and available labor within the segment. The downstream impacts for new homes being completed lead to freight volumes as those new homes get filled with furniture and appliances. The slow build times will mean a bit slower downstream volumes, among other factors impacting the supply chain. 

All eyes are on the consumer as inflationary pressures remain high. One of the last strongholds for overall consumer activity is the jobs market. Job openings and quit rates will get updated in the coming week. Job openings give consumers options to change jobs and go with higher-paying roles, while the quit rate can be used as a gauge of consumer confidence (since consumers typically decide to leave roles when they feel more secure with their own financial and economic outlook). A substantial number of job openings also means that companies are still in dire need of labor due to the high demand for goods and services. If we see that demand ease significantly, the number of job openings will also diminish. The slower growth expected upstream will make its way downstream as consumer spending begins to moderate going into the second quarter. Consumer spending and disposable income will get updates in the coming week and give insights into consumer conditions and purchases for durable goods. The recent downturn in the VOTVI.USA (green line below) suggests that there will be downward movements in the upcoming reports.