Signs point to a market that will be in carriers’ favor
This week’s SONAR Pricing Power Index (PPI): 55 – The latest freight data suggests that the freight market is slightly in carriers’ favor. That is partially due to seasonal and temporary factors. This rating is unchanged from last week.
Three-month SONAR Pricing Power Index (PPI) Outlook: 65 – The freight market could be more significantly in carriers’ favor at the end of March, primarily due to capacity exiting the industry. That three-month outlook also considers that late March is a strong seasonal period for transportation demand, since volume typically surges at the end of a quarter. The potential for continued weakness in freight volume remains the biggest risk to that outlook. That rating is also unchanged from last week.
Spot rates surge to end the year
The two SONAR charts below are the ones that stand out the most in the past week. Average spot rates have risen sharply, and are at their highest levels since the holiday-related spike at the end of 2022. That appears to confirm what tender rejection rates are showing. Carriers are turning down loads to chase more available spot loads that are more highly rated. The rise in spot rates, which was more apparent this past week than in the previous two, came as more carriers recognized the tightening freight market and adjusted rates accordingly. The second chart below, which shows a contraction in the spread between contract and spot rates, indicates that we are in a difficult period for freight brokers, one that is associated with margin contraction.
The average spot rate, displayed in the SONAR National Truckload Index (NTI.USA), surged since mid-December. (Chart: SONAR)
Excluding the impact of fuel, average spot rates (orange line; the data removes fuel surcharges over a $1.20 baseline) have caught up to average dry van rates (white line; excludes fuel surcharges and on a two-week lag) for the first time since early 2022. That is an indicator of a tightening freight market and one where brokers struggle to earn healthy margins. (Chart: SONAR)
National tender rejection rate peaked at 13.2%
That’s the highest level since the end of March 2022, just before the Great Freight Recession. What’s significant is just how much higher the tender rejection rate was this holiday season compared to last year (peaked at 9.4%), and that it did so with such lackluster freight volumes. The implication is that a substantial amount of capacity has left the freight market, which could shift aggressively to being in carriers’ favor next year.
History suggests that tender rejection rates will remain high from now through the end of January due to seasonal factors that include capacity leaving the industry, both on a temporary and permanent basis, and seasonal demand, which includes restocking inventories and gift card redeptions. Breaking the current SONAR tender rejection rate down by equipment types, rejection rates are 11.2%, 22.0%, and 24.8% for the dry van, reefer, and flatbed, respectively.
The SONAR Truckload Rejection Index (2025 – white line) jumped more significantly in December than it did in the prior two years. (Chart: SONAR)
Demand shortfall compared to the prior two years narrowed in December
The SONAR Truckload Volume Index had been well below 2023 and 2024 levels all year, but December demand still showed up (data in the chart above is on a seven-day moving average). (Chart: SONAR)
The SONAR Truckload Volume Index shows that freight demand has been negative year over year, and on a two-year stack, nearly every week this year. But recent weeks have shown considerable improvement starting about two weeks before Thanksgiving. Tender volume was roughly flat year over year in the days before Christmas. That’s far better than the average year-over-year decline of 5%-7% during most of October and November (and often worse than that before October). Looking forward to next year, the outlook for higher average tax refunds (~$3,800 versus $1,000) and the potential for interest rate cuts could serve as demand catalysts.
About the SONAR PPI: The SONAR Pricing Power Index is a qualitative assessment of the balance of negotiating power between shippers and carriers on a scale of 0 to 100 using SONAR data and anecdotes from discussions with SONAR clients. The higher the number, the tighter the freight market and the more that pricing power favors carriers. A 50 represents a balanced market. While the SONAR PPI primarily pertains to the truckload sector, given its size, dynamics in other sectors, such as intermodal and ocean, are also considered.
