Chart of the week: Truck Freight and Contract Rates, Intermodal Contract Rates – Los Angeles to Chicago SONAR: Spot Contract Rates, IMCRPM.LAXCHI
Long-term (purple) contract rates from Los Angeles to Chicago have increased nearly 32 percent over the past two years, according to SONAR factor data. In contrast, the same data set shows a 10% drop in intermodal rates (orange) over that period. Truckload rates (green) on this line have become increasingly volatile, but have increased overall. The widening gap between truckload pricing and intermodal pricing suggests that shippers continue to place a high value on truckload services, even as the cheaper intermodal option gains more share.
The Los Angeles-Chicago line is a vital artery in domestic supply chain networks. It is one of the busiest transcontinental routes in the country, fueled by goods arriving from Asia through the Southern California ports of Los Angeles and Long Beach.
Over the past 30 years, many companies have built warehouses in the area to hold shipments before moving them inland for operations. Both BNSF and Union Pacific operate major rail lines here, giving importers relatively easy access to moving goods inland by rail.
The volume of containers loaded on the line has increased significantly – almost 20% in the past two years – as importers brought goods into the country earlier than usual due to geopolitical tensions and tariff concerns. This “pull forward” has given them enough time to move cargo across the country at a cheaper rate. During the same period, demand for long-haul trucking services outside of this region has decreased by nearly 30 percent.
However, the price of the truck has not decreased along the way, which is somewhat unreasonable. Typically, lower demand leads to lower rates.
Two main forces explain this anomaly. First, the capacity is removed from the market. Weak demand and an oversupply of trucks have made it very competitive for many trucking companies to remain profitable. As capacity exits, gaps in coverage appear that help explain the increased volatility in cash rates. Overcapacity does not guarantee that it is in the right place at the right time.
Second, transport that does Trucking has limited substitutability with multimodal services. This may be cargo from smaller carriers that lack rail ties, or high-urgency cargo because intermodal transit times are slightly longer and less predictable.
So, even if fewer truckloads are leaving Los Angeles, the value of the service is still increasing. If demand – or urgency – returns to the market, this line will be one of the first to react.
About the weekly chart
The FreightWaves weekly chart is a selected chart from SONAR that provides an interesting data to describe the state of the freight markets. A chart is selected from thousands of potential charts in SONAR to help participants visualize the shipping market in real time. Every week a market expert posts a chart with commentary live on the front page. The weekly chart will then be archived on FreightWaves.com for future reference.
SONAR collects data from hundreds of sources, presents the data in charts and maps, and provides real-time explanations of what transportation market experts want to know about the industry.
About the weekly chart
The FreightWaves weekly chart is a selected chart from SONAR that provides an interesting data to describe the state of the freight markets. A chart is selected from thousands of potential charts in SONAR to help participants visualize the shipping market in real time. Every week a market expert posts a chart with commentary live on the front page. The weekly chart will then be archived on FreightWaves.com for future reference.
SONAR collects data from hundreds of sources, presents the data in charts and maps, and provides real-time explanations of what transportation market experts want to know about the industry.
The post Truckload value on critical line is rising despite weak demand appeared first on FreightWaves.
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