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USA LOGISTICS MARKET ANALYSIS 2/18/2022


Today’s lanes to watch: Friday, February 18, 2022



Takeaways for today's lanes:

  • Historically an intermodal lane, loosening dry van capacity in the LA to Dallas lane

makes the highway very competitive.

  • Spot rates have risen from Dallas returning to LA due to increased capacity pushing down rates in Southern California.

  • Vessel delays and port congestion continue to put upward pressure on container spot rates from Shanghai, China to the Port of New York/New Jersey.

LA to Dallas – Historically an intermodal lane, loosening dry van capacity makes trucking very competitive.

SONAR Tickers: INTRM.LAXDAL, TSTOPVRPM.LAXDAL, ORAILINTL.LAXDAL, ORAILDOML.LAXDAL


Highlights:

  • The average dwell times for containers recently imported at the Port of LA and the Port of Long Beach are 5.8 days and 5.1 days, respectively.

  • The average daily international intermodal volume in the LA to Dallas lane is 640 units/day, down 4% month-over-month (m/m) and down 38% year-over-year (y/y). Meanwhile, the average daily domestic intermodal volume in the lane is 461 containers/day, down 5% m/m and up 26% y/y.

  • The current all-in door-to-door intermodal spot rate to move 53’ containers is $3.46/mile and the current average dry van spot rate that brokers are paying for capacity is $3.19/mile, including fuel. Truckstop.com data shows a lower spot rate of $2.83/mile, including fuel.

What does this mean for you?


Brokers: Reduce your bids to reflect the falling rates that other brokers are paying for

on-demand capacity in the lane. SONAR Market Dashboard shows that the average

rate that brokers are paying for dry van capacity in the lane is 13% lower than one

month ago.


Carriers: Tender rejection rates on outbound LA dry van loads continue to decline (currently 6.9%), which suggests that there will be fewer available spot loads. The dry van market in Dallas currently has an outbound tender rejection rate of 13%, which is below the national van tender rejection rate of 18%. However, it should be easy to get reloaded in Dallas given the current Dallas Van Headhaul Index of 83 (numbers above zero mean there is more outbound than inbound demand).


Shippers: Volatility in intermodal spot rates from one week to the next suggest that the Class I railroads have been concerned with securing capacity for contracted shippers in recent weeks. Intermodal shippers with contracts in place should plan for extra time in transit. Given the recent decline in dry van spot rates to $3.19/mile (from $3.71/mile one month ago), spot shippers should use the highway rather than rail intermodal to secure on-demand capacity.


Dallas to Los Angeles – Spot rates are increasing for return trips to LA due to greater capacity pushing down rates in Southern California.

FreightWaves TRAC Market Dashboard – Dallas to Los Angeles


Highlights:

  • FreightWaves TRAC spot rates increased to $1.57 per mile, an increase of 17 cents per mile from a January 17 quarterly low of $1.40 per mile.

  • Outbound tender rejections for the Dallas to Los Angeles lane fell to 10.57%. This is below overall Dallas outbound tender rejections, which are at 13.43%.

  • Dallas tender rejections have decreased across the board due to a decline in outbound tender volumes – from a February high of 479 basis points (bps) on the 12th to 450.27 bps now. The 6% decline in tender volume corresponds to average week-over-week (w/w) tender rejection rate decreases of 15% to 20% for the Dallas market.

What does this mean for you?


Brokers: While spot rates rise, the minor increase in outbound tender lead times to 2.78 days should provide greater opportunities to pre-book freight, as margins can increase 50% if booked more than 48 hours in advance. The tender volumes and rejection rates remain volatile; the Southern California market continues to provide an outsized influence on carriers that seek to offset revenue losses due to recent market softening.


Carriers: Recent data indicates that shippers and brokers will attempt to put downward pressure on rates due to declining tender volumes and rejections. The spot market appears to show carriers have maintained price discipline in spite of declining volumes going back into the Los Angeles area. Continue to stand firm on outbound rates if spot quoting lanes, as the data suggests the actual cost for a truck and it’s theoretical price point remain in contention.


Shippers: The surge of capacity in the Southern California market is causing an upward trend in spot rates, as carriers flex their power and attempt to cover the loss in revenue going back into California. What is notable is the spot rate continues to rise even as tender volume and rejection rates decrease w/w. Outbound tender lead time remains volatile (between 2.6 to 3 days in advance) as other shippers seek rate savings by tendering loads earlier.


Shanghai, China to New York/New Jersey – Vessel delays and port congestion continue to put upward pressure on container spot rates

SONAR Tickers: P44OPPD.CNSHAUSNYC, IOTI.CNSHAUSNYC


Highlights:

  • Inbound twenty-foot equivalent unit (TEU) volumes from Yantian to Los Angeles (LAX) are up 25% y/y, but are down 38% m/m.

  • Ocean containers port pair delays (the difference between expected transit time and actual transit times) from Yantian to LAX are up to 9.7 days on average in January 2022.

  • Ocean container dwell times from Shanghai have increased from 2.7 days to 5.6 days on average w/w, signaling a slowdown in port throughput attributed to Chinese New Year (CNY).

What does this mean for you?


Brokers: Container spot rates from China to the U.S. East Coast increased over 8% w/w, despite the 38% m/m drop in TEU volumes leaving the Port of Shanghai. With vessel port pair delays near their highest levels on record, and weekly U.S. import shipments arriving at the Port of New York/New Jersey at record highs, you are likely to see upward pressure on container spot rates persist for at least the next couple of weeks.


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. 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 seven to 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 ensure that you are able to 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.


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