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SONAR sightings for April 25: Houston to Chicago, US imports/exports update

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: Houston to Chicago

Overview: More upward pressure is being put on spot rates as outbound rejections rise 114 basis points (bps) and the Headhaul Index increases 16% week over week (w/w).

Highlights:

  • Outbound tender volumes are up 5.9% w/w, indicating that demand for outbound capacity is increasing.
  • The Headhaul Index in Houston is up 16% w/w, signaling that there is a growing imbalance between inbound and outbound capacity.
  • Outbound tender rejections are already up 114 bps but are likely to increase further as the demand for outbound capacity increases as well.

What does this mean for you?

Brokers: The Houston truckload market is likely to tighten in the days ahead from a 5.9% increase w/w in outbound tender volumes and a 16% increase in the Headhaul Index w/w. Outbound rejections are already up 114 bps w/w, so be sure to prioritize this lane and let your team know that there is major upward pressure on spot rates.

Carriers: Stay firm on your rates, as you are likely to see pricing power shift further in your favor in the days ahead. Spot rates are down slightly from their six-month highs, but with the growing imbalance in volumes and increasing tender rejections, Houston’s market conditions are very favorable for carriers.

Shippers: Your shipper cohorts currently have tender lead times at 3.3 days, but that is not likely to be sufficient for the increase in demand that is expected in the weeks ahead. In the tightest markets historically, shippers in Houston have increased lead times closer to four days to help offset tightening conditions in the outbound truckload market.


For the week ahead, it is highly likely that we will be seeing the lockdowns in China extend to even more cities with even tighter restrictions. With the true extent (and therefore the implications) of these lockdowns becoming much more evident over the past week, it now seems clear that Chinese export container volumes are about to take a massive hit in the next two weeks. Chinese exports to the U.S. could drop as much as 50% in the next 14 days alone. It is also possible that this decline in Chinese containerized export volumes could decrease further if the lockdowns continue to restrict trucks from moving goods between Chinese cities, which is also true for the containerized freight that has already been imported and is sitting at the port or that is at the factory and is ready to be exported. 

To make matters worse, this decline in containerized volumes from China is likely to be amplified by the simultaneous softening of consumer demand while U.S. importer inventories are at some of their highest levels on record. The Federal Reserve’s hawkish maneuvering on raising interest rates could not come at a worse time, and many indicators are pointing to the fact that it is already too far behind in raising rates to keep inflation under control. So the thought of raising rates into a recessionary environment would only exacerbate the rate of decline if we are truly entering into an economic downturn. For all of the uncertainty that exists, we are moving deeper into uncharted waters, and therefore, anyone involved in the global supply chain should exercise extreme caution and vigilance. 


Lane to watch: Omaha, Nebraska, to Charlotte, North Carolina

Overview: Tripling the national average of outbound tender rejections makes Omaha a tight capacity hub. 

Highlights:

  • Omaha’s outbound tender rejection rate remains the outlier to the national average at 30.96%. 
  • The spot rate for this lane is officially the lowest seen in a month at $2.96 per mile. 
  • Charlotte’s outbound volume rates have risen 14 bps since last week.  

What does this mean for you?

Brokers: Omaha’s outbound rejections are almost three times as high as the national average, making capacity scarce in the heart of the country. The market has a headhaul score of 43.77, indicating there are plenty more outbound loads than inbound loads. 

Carriers: Omaha is proving to be one market that hasn’t eased up on capacity needs. While Charlotte is one of the fastest easing markets in the country, inbound loads do have a hold on volumes there with a headhaul score of -73.68. 

Shippers: Capacity is loosening quickly in Charlotte, making it a less than desirable place to go. With few outbound tender loads available, have those outbound loads tendered at a minimum of three days lead time. Omaha is having the opposite problem and tender lead times will need to stay at four days to prevent the chance of loads being delayed.


Tender rejection rates slowed their descent for both van and refrigerated loads, while flatbed began to rise once again. Easter, which normally sees increasing rejection rates, may be a factor in slowing down the easing process, but there also should be some natural slowing as we get closer to 0% rejection rates. Next week will be a good indicator as to which one has more weight. Spot rates, which are reported on a weekly lag, should show some signs of slowing next week because of this, but we will be watching the rejection rate for quicker indications of the market direction. If rejection rates continue to slow their decline, we can assume that we are approaching a floor with volumes beginning to stabilize. 

So far it appears that shippers are holding more inventory upstream and are avoiding the inflated truckload costs at this point, making this market look a lot more like the 2019 trade war environment of inventory hoarding. We do not see any reason to expect this to change in the near term, so expect capacity to continue to improve throughout this week outside of the flatbed sector.