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SONAR sightings for April 7: Baltimore to Chicago, US imports update, more

The highlights from Wednesday’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 Dallas

Overview: Spot rates hit a floor as compliance increases.

Highlights:

  • Spot rates hit a floor around $2.30 per mile in this lane over the past week, averaging about 9 cents lower than in December. 
  • Elizabeth’s outbound rejection rates have dropped from 17.5% to 9.5% over the past month with a slight uptick over the past few days. 
  • Dallas’ outbound rejection rate has dropped from 15% to 9.9% over the past month.  

What does this mean for you?

Brokers: Do not expect to be able to push rates down much further in this lane. These rates are already close to breakeven and fuel costs may push them higher. 

Carriers: Take what you can get in this lane. Do not expect it to be more than a utilization play on the spot market. Make sure you have your contracts locked up as capacity continues to ease rapidly out of the Northeast. 

Shippers: Expect 90% or better compliance in this lane, especially if you are paying more than $2 per mile on the contracted side. This lane should be relatively easy to cover at this point and will get easier. 


Watch: Carrier update


Lane to watch: Baltimore to Chicago

Overview: Spot rates are likely to increase slightly in the coming days as the Headhaul Index increases 31% week-over-week. 

Highlights:

  • Baltimore outbound tender volumes are up 6% w/w, signaling that demand for outbound capacity has increased significantly from last week.
  • The Headhaul Index in Baltimore is up 31% w/w, signaling that there is a growing imbalance between inbound and outbound volumes. 
  • Baltimore outbound tender rejections are up 7.4% w/w, signaling that capacity is likely tightening significantly in this specific market.

What does this mean for you?

Brokers: The 31% increase w/w in the Headhaul Index is signaling that capacity is likely to get even tighter in the days ahead. In addition, rejections are already up 7.4% w/w. So in the Baltimore market, localized conditions are looking quite a bit different than other major truckload markets. 

Carriers: Stay firm on your rates coming out of Baltimore. With a 31% w/w increase in the Headhaul Index, and rejections already trending up (7.4% w/w), pricing power is likely to shift back in your favor in the days ahead.             
                
Shippers: 
Your shipper cohorts in the Baltimore market have outbound tender lead times averaging 2.4 days, but with outbound volumes on the rise, you should set lead times closer to three to 3.5 days if possible. This will help ensure your carriers/brokers have adequate lead time to secure capacity while conditions tighten in the days ahead. 


Watch: Shipper update


As the freight recession for U.S. surface transportation providers deepens, it is only a matter of time before the same recession inevitably reaches ocean container shipping for U.S. imports. The harsh reality is that over the last 12 months, there has been a significant amount of inventory built up here in the U.S. as importers worked to ensure another potential “bullwhip” or “black swan” did not catch them off-guard with too little on hand to keep shelves stocked. Unfortunately, over that same period of time, inflation has taken hold of the U.S. economy, the Russian invasion of Ukraine has increased geopolitical tensions/uncertainty, and ultimately, consumer demand has begun to taper off as consumers are choosing to spend less on goods and more on services as the post-COVID economy shifts spending patterns. This has left the Federal Reserve with few options except to raise the Federal Funds Rate, which should also have a significant impact on liquidity and credit availability for U.S. businesses. 

For these reasons, it is expected that the freight recession occurring in the U.S. surface transportation market will bleed over soon enough to ocean container shipping. This should cause spot rates to decrease by 50% to 75% over the next three to four months, but these are still uncharted waters, with little historical data to lean on. The “X-factor” left in this equation is how well ocean container carriers will be able to adequately adjust available capacity on the water to help stabilize ocean container spot rates. Right now, from China to the U.S. we are seeing our capacity index at some of its lowest levels in the past 12 months, so it would seem that they are already working on the decrease in container volumes that we are seeing materialize. Also, booking lead times have decreased dramatically, which is likely to confirm the declining volumes with the lockdowns in Shanghai having very little impact on the data points we track in SONAR thus far.