SONAR sightings for April 19: Baltimore to Philadelphia, intermodal and rail update, more

The highlights from Tuesday’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: Baltimore to Philadelphia

Overview: The spot market range spread is now nearly $2.

Highlights:

• The spot market rate, while currently sitting at $6.47, can range between $5.70 and $7.38 – a difference of $1.68 per mile. 
• Baltimore’s outbound tender rejections have leveled off after plummeting 7% late last week. 
• Philadelphia’s outbound tender rejections continue to follow the same downward trend seen over the past month. 

What does this mean for you?

Brokers: Outbound tender rejections are down in both markets, making a spot market that rivals a contract market. However, the volatility on this lane’s specific spot market pricing indicates that loads on this lane should be covered at a minimum of three days out. Keeping with outbound tender lead times will make sure that loads are near the lower $5.70 range instead of the $7.38 range. 

Carriers: The spot market range has wide variability; hold firm on rates to ensure that the higher rates are the best options. Outbound volumes in Baltimore are rising, making it a good time to head that way. Being close to major cities and the Northeast could be a lucrative opportunity to run loads, or a good way to get a relatively high-paying load headed back to home base. 

Shippers: Outbound tender lead times in Baltimore are averaging 2.5 days; it’s three days in Philadelphia. Use that as an advantage to tender shipments early and avoid getting stuck with the $7.38-per-mile spot rate. A difference of $1.68 per mile can add up over many of the longer haul routes. 

The spread between intermodal spot rates (blue line below) and intermodal contract rates (purple line below) is narrowing. At just 33 cents in SONAR, that is the narrowest spread between the two data sets since a seasonally slow period in late January. It is also a narrower spread than most of last year when the spread often ranged from 50-85 cents. Comparing those two data sets is not purely apples to apples. The two data sets come from different sources, the spot rates include fuel while the contract rates in that data set do not, and there are differences in the mix of lanes that are included in those respective national averages. Still, I believe a narrowing spread remains relevant for market participants and analysts since spot rates move more quickly and typically lead changes in contract rates. I expect the domestic intermodal companies to report strong first-quarter earnings in the coming weeks – SONAR data shows intermodal contract rates 13% higher y/y in Q1 2022. But I also expect the domestic intermodal providers to issue more cautious pricing commentary than they have in recent quarters in light of the weakening freight market, which will have impacts across modes.  

Watch: Shipper update

Lane to watch: Chicago to Harrisburg, Pennsylvania

Overview: Brokers should cut their bids as spot rates fall sharply.

Highlights:

• The dry van tender rejection rate in the lane of 12.1% is 160 basis points (bps) higher than the national van tender rejection rate.  
• The dry van spot rate has fallen 16.3% in the past month to $3.90 a mile, including fuel. 
• The most recently published intermodal spot rate is $3.82 a mile, including fuel. 

What does this mean for you?    
                            
Brokers: Cut your bids to reflect the rapidly falling dry van spot rates in the lane. When negotiating with carriers, cite Harrisburg’s higher-than-average van outbound tender rejection rate and Van Headhaul Index. 
                
Carriers: Accept tendered loads. While the roughly 700-mile distance is not ideal, Harrisburg remains a tighter market than most with a 13.6% van outbound tender rejection rate compared to the 10.5% national average. Harrisburg also remains a headhaul market with a Van Headhaul Index of 66.  
                                            
Shippers: Spot shippers are better off using the highway as the spread between dry van spot rates and domestic intermodal rates has tightened nearly to parity. Despite the falling tender rejection rates in the lane, shippers should tender loads with about three-day lead times given the still-high 2.9-day average lead time in the lane.

Outbound load tender volumes continue to fall nationwide and are down 20% year-over-year (y/y) – from 15294.33 bps to 12256.29 bps. This decline appears to have no end in sight as consumers shift from goods to services and inflationary pressures reduce demand for truckload orders. While volumes are up 25% compared to 2018 levels before the pandemic, there also is approximately 10% more trucking capacity that has entered the market since the pandemic began. Expect spot rates to continue their downward trend as this increased trucking capacity competes for declining trucking demand, pushing down rates and constraining trucking margins. While the Easter holiday may have had some impact on trucking capacity and demand, expect greater pressures on load tender compliance rates and service levels as shippers and customers take advantage of this competition to drive down rates and seek transportation cost savings relief. There is a risk that contracted rates, negotiated earlier during tighter capacity, may face disruption as shippers could push traditionally contracted lanes on the spot market if rates decline further below contracted rate levels. 

Watch: Carrier update

Source: freightwaves - SONAR sightings for April 19: Baltimore to Philadelphia, intermodal and rail update, more
Editor: FreightWaves Staff