The freight market is exhibiting further signs of tightening, with capacity leaving the market and intermodal spot rates surpassing contract rates in key lanes. These trends suggest a shift towards a more robust freight environment.
Table Content:
Tender rejection rates have been steadily increasing since early October, even as tender volume decreases. This indicates a reduction in available capacity, contributing to a tighter market. Both truckload spot rates and tender rejection rates corroborate this tightening trend. Notably, the tender rejection rate has reached its highest point since the first half of 2022, exceeding typical seasonal fluctuations. While key volume metrics in SONAR, like the Outbound Tender Volume Index, remain below last year’s levels (potentially due to private fleet growth), the observed market contraction is primarily attributed to capacity exits. This departure of capacity is significant, as its prolonged presence previously contributed to an unusually extended freight market recession.
Consequently, shippers are advised to adopt a risk-mitigation strategy for capacity sourcing in the coming year. Securing capacity through contract rates, even at potentially higher levels, is recommended. Prioritizing the lowest rates could lead to service disruptions in the future. For a deeper understanding, refer to these FreightWaves articles: Truckload Dry Van Market Response to Peak Season and Rising Rejection Rates Reveal Truckload Capacity Exodus.
Intermodal Spot Rates Surge in Densest Lane
FreightWaves recently introduced new intermodal contract rate data in SONAR, covering 67 lanes and accessible via IMCRPM tickers. This complements the existing intermodal spot rate data (INTRM tickers). Both datasets incorporate fuel surcharges, with spot rates also including peak season surcharges.
Comparing these datasets reveals carriers’ preference for allocating capacity. For most of 2023, intermodal spot rates from Los Angeles to Chicago trailed or matched contract rates. However, a shift occurred in early November as sustained import volumes continued to fuel the intermodal network beyond seasonal norms. Currently, intermodal spot and contract rates (including fuel) in this lane stand at $1.78 and $1.43 per mile, respectively. These remain considerably lower than corresponding dry van highway rates ($2.38 spot and $2.16 contract per mile, according to the SONAR Market Dashboard).
Record container volumes at the Port of Los Angeles have significantly contributed to intermodal volume growth. The port anticipates another record-breaking month in December, citing a 13% increase in empty containers on departing vessels as an indicator of sustained strong import volume.
The Stockout Show: Leveling the Playing Field for SMBs with Software
The Stockout show recently featured a discussion on the terminated Kroger-Albertsons merger, the tightening freight market, and C.H. Robinson’s investor day. Additionally, Ara Ohanian, CEO of Netstock, a provider of supply and demand software for small and medium-sized shippers, was interviewed. Netstock aims to empower smaller shippers by providing access to sophisticated software and analytics, typically only available to larger companies with dedicated internal teams. The software offers 365-day forecasting capabilities, crucial for navigating disruptions like tariffs, geopolitical events, and labor strikes that impact supply chain lead times. Ohanian observed that many clients are adjusting their supply chains towards nearshoring in anticipation of tariffs, but cautioned that transitioning to less experienced suppliers carries inherent risks. You can view the episode here and access the full The Stockout playlist here.
