Los Angeles freight volumes are the highest in the U.S., but carriers beware

The Headhaul Index measures the difference between outbound and inbound load volumes. If a market has a positive HAUL value, there are more outbound loads than inbound, where a negative value indicates there are more inbound than outbound loads. L.A.’s HAUL value jumped coming out of the New Year, increasing 143% over pre-Christmas levels. Conversely, Stockton’s HAUL value dropped 43% in the same time frame. So why does this matter?

Carrier rates are heavily influenced by the availability of loads in an area. Markets with positive HAUL values tend to have better odds for carriers to find loads moving out of the market. These markets will have lower empty or deadhead mile percentages.

The fact the L.A. market has plenty of freight available means there will be downward pressure on inbound L.A. rates in the spot market. If that trend lasts long enough it will end up impacting contract rates. On the other end of the spectrum, loads going into the Stockton market will see upward rate pressure, since it will be more difficult for carriers to find backhauls due to the oversupply of trucks in the market.

The fact these two markets appear to be working in an almost perfect opposition, considering their proximity to each other, is a good indication that a lot of outbound L.A. freight has its destination in the Stockton market. Carriers accepting loads into the L.A. market are probably only thinking one load in advance. The problem with accepting loads into the L.A. market currently, is that most of the freight is ending in backhaul markets like Stockton and Phoenix.

Carriers should be thinking about the odds of finding loads many markets in advance. If market dynamics change, which they appear to be doing, carriers will be in a poor position to take advantage. The knowledge that the trip to the West Coast will eventually hit a dead end should put upward pressure on rates even though the L.A. outbound situation is still quite strong. Deadheading out of northern California or Phoenix is an inevitability that should be factored into any current rates.   

About the indices presented in this article

(SONAR: HAUL.LAX, HAUL.SCK) Headhaul Index – Los Angeles, Stockton – The Headhaul Index is the absolute value of the outbound tender volume index less the inbound tender volume index for individual markets. The higher the value the more the amount of outbound loads exceeds inbound loads and vice versa. A very negative value indicates the market is a heavy backhaul market.

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