SONAR sightings for May 27: Chicago to LA, carrier update, more

Carriers: Highway carriers that are tendered loads in this lane should recognize that the loads are likely to be time-sensitive and price accordingly. So far this year, many carriers have priced themselves into the LA market, which has created plentiful capacity in LA and resulted in the relatively low LA dry van outbound tender rejection rate of 3.1% (compared to the nationwide 8.9% dry van tender rejection rate). 

Shippers: Shippers moving non-time-sensitive loads can take advantage of the currently low intermodal spot rates as carriers reposition containers to the West Coast. However, industry data shows that intermodal service is still not optimal, and for more time-sensitive loads, shippers should extend lead times past the 2.7- and 2.4-day average for outbound LA long-haul loads and Chicago inbound long-haul loads, respectively. In this case, it may make sense to extend lead times for pickup after Memorial Day.  

Watch: Carrier update

Lane to watch: Houston to Chicago

Overview: Spot rates are likely to rise ahead of the holiday weekend as the Headhaul Index increases 9% w/w.

Highlights:

• Outbound tender volumes are up 2% w/w, indicating that demand for outbound capacity is increasing, but at a slightly slower pace.
• The Headhaul Index in Houston is up 9% w/w, signaling that there is a growing imbalance between inbound and outbound capacity.
• Outbound tender rejections are already up 192 basis points (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 2% increase w/w in outbound tender volumes and a 9% increase in the Headhaul Index w/w. Outbound rejections are also up 192 bps w/w, so be sure to prioritize this lane and let your team know that there is upward pressure on spot rates before the weekend.

Carriers: Stay firm on your rates; you are likely to see pricing power shift further in your favor in the days ahead. Spot rates are down about 30 cents a mile 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 3.2 days, but that is not likely to be sufficient for the increase in demand ahead of the holiday weekend. Historically, in the tightest markets, shippers in Houston have increased lead times closer to four days to help offset tightening conditions in the outbound truckload market.

Trucking capacity continues to be more available as the market continues to correct. Spot rates fell ever so slightly for dry van and reefer shipments last week, with flatbed remaining fairly consistent. As we head into major storm season in the Midwest, flatbed rates could rebound faster than other modes as a result of FEMA shipments. Shippers that are not involved in flatbed shipping should be seeing volumes slightly increase and rates similar to those of a few months ago. Tender volumes for contracted loads did increase quite a bit last week, indicating some shippers may be resuming activity as capacity becomes more reliable with rejection rates falling below 9%. Shippers should continue to push freight at this point since there will be little resistance and lower costs. Despite rising fuel costs, carriers are looking for consistent contractual freight, so if you have freight available, ship it out.