The highlights from Thursday’s SONAR reports. 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 TRAC — the freshest spot rate data in the industry.
Ocean lane to watch: Yantian (Shenzhen, China) to Los Angeles
Overview: Spot rates rise from China to the U.S. West Coast despite the drop in volumes caused by Chinese New Year (CNY).
Highlights:
- Inbound twenty-foot equivalent unit (TEU) volumes from Yantian to Los Angeles (LAX) are down 21% year-over-year (y/y) and down 32% m/m.
- Ocean containers port pair delays from Yantian to LAX (the difference between expected transit time and actual transit time) are up to 12 days on average in January 2022.
- Ocean container dwell times from Yantian have increased from 7.75 days to 16 days on average week-over-week (w/w), signaling a tightening of capacity in the port on a Port of Lading (POL) basis.
What does this mean for you?
Brokers: With the drop in TEU volumes w/w and m/m, we would normally expect there to be significant downward pressure on spot rates from China to the U.S. West Coast. However, these rates actually increased 3% w/w, according to the Freightos Baltic Daily Index. This upward movement in spot rates was primarily driven by the capacity/supply-side (port pair) delays caused by the port congestion at the Port of Los Angeles. Be sure to keep your rates elevated until we get confirmation that the port pair delays are easing significantly.
Carriers: The pricing power on this lane remains in your favor, but be aware that there could be a significant drop in TEU volumes in the weeks to come. Be sure to keep an eye on the SONAR TEU volume index to monitor when you are likely going to need to shift your rates downward to maintain spot market volumes.
Shippers: It would be wise to try and shift your booking lead times out by 7-14 days if possible. The capacity issues are likely to persist on this lane for at least another month, so moving your booking lead times out further will help you find space on vessels that match your needed arrival date. Be aware that you may still have to pay a premium in the spot market to get your volumes moving.
Watch: FreightWaves, project44 announce data partnership
Lane to watch: Indianapolis to Atlanta
Overview: Indianapolis’ outbound rejection rates drop rapidly but remain high.
Highlights:
- FreightWaves TRAC spot rates have been relatively flat in this lane since Jan. 27, hovering around $4.30 per mile.
- Indianapolis’ outbound tender rejection rate has fallen from approximately 29% on February 7 to 24.6% on the 15th, but is still above the 23% average in November and December 2021.
- Atlanta’s outbound rejection rate has been trending lower since the start of the year, falling from 19.5% on Jan. 2 to 13.8%.
What does this mean for you?
Brokers: Expect continued pressure on rates to be present, but capacity should be easier to find than last week. Expect declining spot volumes in this lane with small increases in carrier availability. Any rate below $4 per mile is a solid win.
Carriers: Expect less spot market activity in this lane this week as Indianapolis has recovered from the winter weather that hit two weeks ago. Capacity remains tight, however, and another storm is scheduled to hit nearby. Loads moving in this lane are much more favorable for those moving north and west.
Shippers: Push freight early next week if possible to land in-between the storms that may have a slight impact on capacity. Capacity is easing and should be optimal for transactional freight moving outside the contract market next Monday and Tuesday (Feb. 21-22).
Watch: Shipper Update
Lane to watch: Roanoke (Va.) to Indianapolis
Overview: Outbound tender rejections continue to oscillate between 25% to 30% which is reflected in elevated spot rates.
Highlights:
- FreightWaves TRAC spot rates began an upward climb after Jan. 1, rising 29 cents from $3.30 per mile on that date to plateau around $3.59 per mile for most of February.
- Outbound tender rejections in the Roanoke market remain volatile with rejection ranges of 12.5% to as much as 25.76%. The largest rejection gains are on intra-Virginia destinations such as Winchester, Richmond and Norfolk.
- The Roanoke to Indianapolis lane remains higher than the market average at 29.59%, indicating continued capacity challenges as this lane runs through parts of West Virginia’s mountainous terrain.
What does this mean for you?
Brokers: If bidding for this lane, focus on commodity and weight, because the routing through West Virginia can be difficult for carriers if weights are in excess of 43,000 pounds. In addition, winter conditions appear to be a contributing factor to higher seasonal spot rates. The rising tender rejections from the Roanoke market and declining rejections in the Indianapolis market could present greater margins if you find the right backhaul carrier for this lane.
Carriers: Increase spot rates to compensate for the reduced transit and extra dwell time caused by winter weather conditions. The routing through West Virginia will pose a challenge for less experienced drivers and at 490 miles for the lane, there is little room for error if there are delays due to loading or unloading in the Roanoke market. If this is a contracted lane continue to communicate capacity challenges as there appears to be another winter weather system that will impact this area in the coming days.
Shippers: The rising tender rejection rates and spot rates present an inverse challenge to shippers. Focus on increasing tender lead times and attempt to incorporate greater flexibility for carriers and brokers attempting to deliver into Indianapolis. Given COVID restrictions and tight labor, the biggest opportunities for cost savings are taking steps to decrease extra wait times from loading or unloading, because any delays on the 490-mile run will potentially cost carriers extra time and lost revenue if delivery appointment windows are not made.
Watch: Carrier Update
Focus on … Outbound Tender Volume Index monthly change
Tender volumes can experience volatile swings on a weekly basis, but broadening the time horizon allows SONAR subscribers to focus on areas experiencing prolonged volume growth.
The Outbound Tender Volume Index – Monthly Change signals which markets are experiencing prolonged volume growth (or contraction).
On the map below, the white and blue markets are where volumes have grown over the past month, while the red markets indicate volume contraction month-over-month (m/m).
The largest markets in the country continue to see volume levels increase despite tender rejection rates falling simultaneously.
Volume levels in both Ontario and Atlanta are up over 5.5% m/m while in other markets like Harrisburg and Chicago volume levels are up 12% m/m.
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