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USA LOGISTICS MARKET ANALYSIS 12/29/2021


Today’s lanes to watch: Wednesday, December 29, 2021


Takeaways for today's lanes:

  • From Los Angeles to Chicago, spot rates and tender rejection rates remain elevated; primarily due to lack of capacity at origin.

  • FreightWaves TRAC spot rates from Atlanta to Cleveland are at their highest level in the past month.

  • From Toledo to Dallas, tender rejections jumped 10 basis points (bps) – a 50% increase in the past two weeks. In addition, spot rates remain elevated.

L.A. to Chicago – Spot rates and tender rejection rates remain elevated primarily due to lack of capacity at origin.


SONAR Market Dashboard Trac Spot Rates from LA to Chicago


Highlights:

  • The current tender rejection rate in the lane is 20.4%, which remains elevated compared to the 17%-18% tender rejection rate prior to Christmas.

  • The dry van spot rate has risen steadily during the past month – primarily due to less available capacity at origin, which is typical for this time of year. The current dry van spot rate is $3.68/mile, including fuel, according to FreightWaves Market Dashboard.

  • The latest intermodal spot rate is $4.10/mile, including fuel surcharges, which is too high for spot shippers to consider using rail intermodal in the lane.

What does this mean for you?


Brokers: Raise your rates relative to where they were before a portion of the L.A. capacity left for the holidays. When bidding for capacity, keep in mind not only that the latest dry van spot rate is $3.68/mile, but that $3.82/mile and $3.48/mile represent spot rates in the 67th and 33rd percentiles, respectively. All quotes include fuel surcharges.


Carriers: Seek to haul loads for rates higher than what you would have received in recent weeks given the seasonal tightness in the Los Angeles market. It should be easy for dry van carriers to get reloaded in Chicago given the Van Headhaul Index of 28.5, which indicates that more loads are leaving the Chicago market than entering it.


Shippers: In light of the relatively tight conditions at origin, keep lead times extended to help secure capacity. Other shippers moving long-haul loads (800+ miles) outbound from L.A. have lead times extended to 2.5 days, on average, which is at the high end of the 1.7-2.5 day range of the past year.


Atlanta to Cleveland – Tight capacity in each market is placing upward pressure on already elevated rates.


SONAR Market Dashboard TRAC Spot Rates from Atlanta to Cleveland


Highlights:

  • The rejection rate out of Atlanta increased 250 bps over the past week, while load imbalance in the market continues to increase.

  • The rejection rate in Cleveland is currently 28.5%, the highest it has been since early April, after increasing 830 bps over the past week.

  • The FreightWaves TRAC van spot rate from Atlanta to Cleveland is $3.16/mi, including fuel surcharge, which is the highest level in a month.

What does this mean for you?


Brokers: Capacity is likely to continue to tighten, leading to increased spot market activity. The tightening in both markets is going to place more upward pressure on spot rates in the coming days. Try and secure capacity around the $3.16/mi level to pad margins ahead of rising spot rates.


Carriers: Both markets have tightened over the past week, placing increased pricing power into carriers’ hands. Take advantage of this pricing power by putting pressure on spot rates. Though Cleveland isn’t traditionally the best market for carriers, recent tightening has made the market much more attractive.


Shippers: Extend lead times in order to secure capacity during the final week of the year. Expect disruptions to carrier networks, increased spot market activity and higher rates throughout the rest of the week


Toledo to Dallas – Tender rejections have jumped 10 bps for a 50% increase in the past two weeks. Tender rejections have reached a 3-month high and spot rates remain elevated.


SONAR Market Dashboard Trac Spot Rates from Toledo to Dallas


Highlights:

  • Outbound tender rejections in the Toledo to Dallas lane increased 20 bps (or 50%) since December 14.

  • The Toledo market as a whole saw weighted tender rejections increase 21.67 bps, putting total outbound tender rejections at 40.82%.

  • Spot rates for the Toledo to Dallas lane remain high at $2.87 per mile, a 5 cent per mile decrease from mid-December highs of $2.92 per mile.


What does this mean for you?


Brokers: Increased tender rejections represent the potential for increased spot market activity. Approach any spot quotes with caution, unless booking with a truck in hand or the customer is willing to pay a premium. Always ensure an adequate margin buffer due to lack of capacity during the holidays.


Carriers: Increased tender rejections provide a buffer due to weather and holiday-related service disruptions. Many drivers are currently at home for the holidays and capacity will remain light into 2022. Continue to communicate with customers on contracted or committed lanes regarding availability and tender compliance until fleet availability returns to pre-holiday levels.


Shippers: Consider adjusting rates or start working down the routing guide while communicating priority loads with broker or carrier partners. Continue to push back nonessential loads until after the new year. There will be greater leverage to hold carriers and brokers accountable if a new bid cycle was recently concluded.

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