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SONAR sightings for April 12: Chicago to Dallas, intermodal 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: Chicago to Dallas

Overview: Domestic intermodal volume reaches a new high, suggesting railway fluidity has improved.

Highlights:

  • The door-to-door intermodal spot rate in the lane declined 16.4% in the past week – from $4.06 a mile to a still-elevated $3.39. Those rates include fuel. 
  • Meanwhile, the average dry van spot rate in the lane is $3.02 per mile, including fuel. 
  • Domestic intermodal volume averaged 432 containers a day in the past week, up 32% year-over-year.  

What does this mean for you?           

Brokers: Brokers should continue to lower their bids gradually in the lane to reflect market conditions. During the past month, dry van spot rates in the lane declined 9.5%. When negotiating with carriers, stress that tender volume data show Dallas as one of the strongest headhaul markets in the U.S.  

Carriers: While SONAR data shows the Dallas market has a tender rejection rate that is 230 basis points (bps) below the national average, it is likely that carriers will still want to accept tenders that are inbound to Dallas. Dallas is one of the strongest headhaul markets currently, with a Van Headhaul Index of 92. 

Shippers: Domestic intermodal volume in the lane has risen sharply in recent months, suggesting that railway fluidity has improved in the lane, which should benefit shippers with intermodal contracts in place. Meanwhile, spot shippers are better off using the highway given the relative spot rates.


Watch: Shipper update


As has been discussed heavily of late by FreightWaves, both SONAR data and industry commentary suggest to us that the trucking industry may be headed for an industrywide recession, with market conditions for carriers that may become more severe than in 2019. A portion of that thesis is related to the sharp drop in the volume of truckload tenders, or requests by shippers to move loads.

As shown in the SONAR chart (below right), the Van Outbound Tender Volume Index (VOTVI) and the long-haul OTVI declined 14.4% and 15.7%, respectively, from one month ago. Meanwhile, loaded domestic intermodal volume only dropped 2.2% during that same period. Here are a few possible reasons for that:
1) Truck demand simply reacts more quickly to changes in freight demand and is more sensitive to those changes.
2) Inventory levels, which are now elevated, have lowered the time sensitivity of goods movement.
3) A lack of warehousing space is encouraging shippers to use the slower transport mode as a way of having storage in transit.
4) Lower freight demand has improved railway fluidity by alleviating congestion at intermodal terminals and improving container turn times.
5) High diesel prices encourage shippers to use intermodal because intermodal fuel surcharges are typically about half of truckload fuel surcharges.

Those differences appear to only be giving intermodal volume a temporary reprieve until some of those factors normalize. Assuming that the drop in freight demand persists, I expect intermodal volume and truckload tenders to move much closer together in the coming weeks and months.


Lane to watch: Denver to LA

Overview: Rates are on the rise as rejections fall.

Highlights:

  • Spot rates have increased 60 cents a mile in this lane in the past month. By contrast, rates from Denver to Dallas have dropped 12 cents a mile over the same period, indicating carriers’ preference for moving eastward. 
  • Rejection rates in this lane have plummeted from 18% at the start of the year to 6% currently. 
  • LA’s outbound rejection rate has fallen to pre-pandemic levels, moving below 4% over the weekend. 

What does this mean for you?

Brokers: Pad margins on loads heading into Southern California. Spot market volumes have dried up, meaning carriers without contracted loads will struggle to reload. Carriers will favor loads moving eastward as there is more opportunity and load density. 

Carriers: Make sure you have a solid plan in place before heading into LA. Missing on loads heading into LA is much worse than not having a load eastward due to shipper density. The current LA market looks more like the traditional January that occurred before the pandemic.

Shippers: Make sure you have this lane set up under contract to get the best compliance. Carriers are willing to take just about any load they can get at this point but will not cover this lane on the spot market – a dramatic reversal of the previous trend of just over a month ago.


Watch: Carrier update