The highlights from Thursday’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: Las Vegas to Seattle
Overview: Spot rates have stabilized after falling from early January highs while outbound tender rejections have increased.
- Spot rates have stabilized at an average rate of $3.33 per mile after falling from an early January high of $5.19 per mile.
- Outbound tender rejection rates from Las Vegas surged over the past nine days, climbing from 5% to 18.64%
- Outbound tender rejection rates from the Seattle market remain consistently lower at 3.39%, while averaging between 4% and 5% in the past month.
What does this mean for you?
Brokers: The rise in rejection rates from Las Vegas is notable as outbound tender volumes declined during an eight-day period, falling from 51.09 basis points (bps) to 38.16 bps. Since the Las Vegas market has less capacity than the adjacent Los Angeles market, any volatility in volume levels can have an outside impact on rejection rates. With spot rates ranging from a high of $3.56 per mile to a low of $3.04 per mile, there is a renewed focus on carrier pricing data, as the opportunity to price high and attempt to buy low is a valid strategy in the face of lower volumes.
Carriers: The recent surge in rejection rates appears to not be spreading to the West Coast, as SONAR data shows outbound Las Vegas to California lanes remain at or below 5.5%. Knowing that rejections are for eastward lanes, there can be some opportunity to gain load volumes or quote ad hoc loads if an eastward backhaul is needed, as the rise in rejection rates indicate a lack of carrier capacity.
Shippers: Focus on pushing down rates for westbound loads out of Las Vegas, as the stabilization of rates going to Seattle paired with lower outbound tender rejection rates going west, can present favorable terms when negotiating rates. For loads not going to Seattle or heading eastward, expect greater volatility until adequate carrier capacity can enter the market.
I consider the intermodal spot rates in SONAR to be directly comparable to dry van spot rates because the intermodal spot rates in SONAR are door-to-door rates to move 53-foot containers and include fuel, as the dry van spot rates do. In most cases when comparing intermodal spot rates to dry van spot rates in the same lanes, intermodal spot rates have held up much better than dry van spot rates, which have fallen sharply this year. In some lanes, such as Chicago to Elizabeth/Linden, New Jersey, and Chicago to Atlanta, intermodal spot rates are now above the prevailing dry van spot rates. Intermodal spot rates are also above dry van spot rates in the LA to Dallas lane, as they were throughout most of last year. There is no reason for shippers to use rail intermodal unless they are offered a discount to the highway — I doubt that much, if any, volume is moving via rail intermodal at the rates shown for those lanes. When the railroads price intermodal spot rate for a lane above the market-clearing dry van spot rate, that indicates that the railroads are protecting capacity for intermodal shippers with contracts in place and, as a practical matter, are not accepting spot loads (at least not at a reasonable price). Therefore, intermodal shippers should currently be wary of service levels in the CHI-EWR, CHI-ATL and LAX-DAL lanes, which could stem from equipment availability or other issues and have contingency plans in place for time-sensitive loads.
Lane to watch: Nashville, Tennessee, to Greensboro, North Carolina
Overview: Rejection rates bounce out of Nashville.
- Nashville’s outbound tender rejection rate has jumped from 11% to 13.5% over the past week, reversing a downward trend.
- Spot rates have also reversed course after falling throughout April. Rates are up 2.5% over the past week.
- Rejection rates out of Greensboro have increased from under 5% on May 2 to 6.7%.
What does this mean for you?
Brokers: Make Nashville loads a higher priority to find coverage and expect some slight upward pressure on rates. Target all-in carrier rates from about $1,565 to $1,750.
Carriers: Expect increasing activity in this lane. Rejection rates are relatively low out of Greensboro but are on the rise. Call your shippers in either of these markets to see if they need any extra help.
Shippers: The cost of 100% compliance is currently around $1,680 in this lane. If you are paying at this level or higher, you should see excellent performance from your carriers.
The ISM Manufacturing Index (formally known as the PMI) eased throughout April, down to 55.4. This was a slight downward movement, but manufacturing is still in expansion territory and will continue to feed into flatbed volumes, keeping capacity relatively tight. The Price Index from ISM also had a slight decline, though it remains incredibly elevated at 84.6. The jobs market received many updates with openings hitting a new high of 11.5 million, nearly double the amount of available labor. Quits also rose, showing that Americans are still opting for new opportunities. The unemployment rate came in at 3.6%, another confirmation of the strain in this tight labor market. However, participation rates have yet to rebound to pre-pandemic levels and will continue to be an issue for various segments including manufacturing, warehousing and construction.
The Consumer Price Index and Producer Price Index will get updated in the coming week. The fight against inflation is in full swing as the Fed continues to pursue interest rate hikes. Consumers shifting to services from goods will begin impacting producers, especially those holding on to too much of the wrong inventory. There is a narrow runway for a soft landing in the second quarter.