Average spot rate hits $3.10/mile, supported fuel, and a tight market
This week’s SONAR Pricing Power Index (PPI): 70 (unchanged) – This past week, the national tender rejection rate remained above 4%, while the average spot rate continued to move higher, from $2.98/mile to $3.10, a new year-to-date high. While the surge in spot rates at the end of the quarter was partially driven by higher fuel prices, carriers are only able to pass rising costs along when they are in control of the market, as they are now.
Three-month SONAR Pricing Power Index (PPI) Outlook: 75 (unchanged) – No data in the past week changes the 3-month outlook, which anticipates the freight market further tightening in the second quarter. While April is normally a seasonally weak month for freight, it’s starting off on a strong note, and as the quarter progresses, seasonal events such as International Roadcheck and Memorial Day should further contribute to tightness. In addition, the freight market should also benefit from shipments of bulk summer merchandise.
National tender rejection rate stays above 14%
The national tender rejection rate across all equipment types (2026 – white line) is dramatically above levels of the past three years. (Chart: SONAR)
In the past week, the national tender rejection rate took a slight breather, declining from 14.73% to 14.01%. That was expected after the rate hit the highest level in three years and given that the first week of April usually commands less freight demand than the last week of March. So, my view remains unchanged that the freight market has fundamentally shifted from the recent period of looseness that lasted almost four years, beginning in early 2022.
Tender rejection rates have been particularly high in specialized sectors. The flatbed market appears especially tight with a 45% rejection rate. The improvement in the flatbed sector likely reflects a pickup in activity in the industrial economy, which has been cited by recent ISM indexes and rail traffic reported by the Association of American Railroads.
The SONAR Truckload Rejection Index is shown above for dry van (white), reefer (green), and flatbed (red) segments. (Chart: SONAR)
Spot rates surge further
The average spot rate, displayed in the SONAR National Truckload Index (NTI.USA). (Chart: SONAR)
Lately, every day, the national average spot rate is higher than the last. In the past four weeks, the average spot rate went from $2.76/mile, to $2.82/mile, to $2.98/mile, to a latest average of $3.10/mile. Spot rates are inclusive of fuel surcharges, and some have suggested that the higher rates are simply a function of passing on surging fuel costs, which have risen ~42% since the start of the Iran conflict. Certainly, carriers are passing along rising costs, but history shows that they are only successful when the market is tight, as it is now.
Comparing the average spot rate (white line) to Diesel prices (orange line) shows that when the freight market is loose, carriers providing on-demand capacity struggle to pass along rising costs. A good example of that is the third quarter of 2023. (Chart: SONAR)
Freight demand picks up to end 1Q
Total truckload tender volume, which includes freight that is tendered for the first time as well as freight that has been rejected and re-tendered, surged to end the first quarter. (Chart: SONAR)
The volume of accepted tenders has also picked up in the past two weeks and is now roughly in line with 2023 levels (yellow). This chart understates the total freight volume movements when compared to the past two years, because it does not include freight that falls through the routing guide and ultimately moves on the spot market. (Chart: SONAR)
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.
