Geographical differences emerge with some US markets looser than others
This week’s SONAR Pricing Power Index (PPI): 40 (market favors shippers in general; up from 35 last week to reflect rising tender rejection rates in certain segments and geographies.)
3-month SONAR Pricing Power Index Outlook: 45 (market slightly favors shippers; up from 40 last week.)
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 from 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.
For additional detail on the PPI, I discuss the rationale behind the SONAR Pricing Power Index rating on The Stockout show live each Monday at 9 a.m. ET on FreightWaves.com. Replays are available via The Stockout YouTube Page here.
Tender volume is down y/y, trending in line with 2023 levels
2025 tender volume (white line) declined from January to February before stabilizing. (Chart: SONAR)
Tariffs have shown up in numerous SONAR charts (see article here for detail), and tariff uncertainty makes it difficult to separate changes in market fundamentals from short-term noise. It’s clear that some shippers have reacted to tariffs by pulling freight forward, but another reasonable response to an unusually high degree of uncertainty is to delay investment until there is more clarity.
That may be contributing to tender volume that is lackluster overall. Tender volume measures the frequency of requests from shippers to move loads, which, after weakening through early February, has partially recovered in late February and early March and is now trending roughly in line with 2023 levels but below last year. March is typically a strong seasonal month when bulky summer merchandise starts to move and shippers look to book revenue by the end of the first quarter. But that is layered on top of an outlook in which tariffs on North American trade might be 25% or northing next week, or both depending on the sector.
The Outbound Tender Volume Index (OTVI – shown above) is 7.2% below the year-ago level after increasing 1.1% from the prior week. Dry van demand has been more volatile than reefer demand, which may reflect deteriorating consumer sentiment. That 7.2% year-over-year decline in overall tender volume breaks down to a 5.5% decline for the reefer segment and a more substantial 8.7% decline for dry van. The weakness in dry van volume can be partially attributed to market share gain by rail intermodal in certain dense corridors, as described below.
Tender rejection rates rise as tariffs hit more substantially for flatbed and outbound Canadian loads
The national tender rejection rate moved up sharply to start March, but it may reflect a temporary change in the market as some shippers scramble to avoid tariffs. (Chart: SONAR)
The Outbound Tender Reject Index, a measure of relative tightness in truckload capacity, remains above year-ago levels despite declining tender volume and increased 66 basis points in the past week from 5.38% to 6.04%. That was largely driven by flatbed tender rejections, which increased from 9.4% to 31.2%. That unusual change likely reflects a rush to move industrial materials, such as Canadian lumber, cross-border to avoid tariffs. They might otherwise have moved later or by rail.
The U.S. flatbed tender rejection rate (white line) and the tender rejection rate for outbound Canadian loads (red) moved up sharply in the past week while the U.S. dry van (yellow) and reefer (green) tender rejection rates moved only modestly. (Chart: SONAR)
Setting aside the impact of tariffs during the past week and the spike on flatbed tender rejections, which may end up being only a blip, tender rejection rates are still higher year over year on lower tender volume. The implication is that the magnitude of capacity that has exited the market in the past year has been more impactful to market conditions than the decline in tender volume over the same period. That potentially sets the industry up for tightness during the stronger seasonal months. However, consumer wariness regarding the impact that tariffs may have on inflation could put downward pressure on freight volume and inhibit a tightening of the freight markets even in the stronger seasonal months.
The outbound tender rejection rates for LA and Chicago are shown in white and yellow, respectively. (Chart: SONAR)
While the nationwide overall tender rejection rate has risen relative to last year at this time, it’s been highly mixed by market. Typically, the largest freight markets have tender rejection rates that are below the national average. Currently, that is true in some, but not all, cases. The chart above is one example – carriers are rejecting just 2.4% of outbound LA loads but 7.9% of outbound Chicago loads. That can be attributed to carriers sending capacity west and the competitiveness of rail intermodal in the dense lanes that originate in Southern California (see FreightWaves article here for detail).
Spot rates remain higher than year-ago levels
Average spot rates, adjusted for changes in fuel prices, remain above year-ago levels, driven by rising rates in certain locations. (Chart: SONAR)
The SONAR National Truckload Index, an aggregate of spot rates with the impact of fuel removed, shows a decline in rates that is very consistent with the pattern of the past two years – declining in the early months of the year. The fuel-adjusted spot rates shown in the chart above declined 58 basis points week over week and are 8.2% higher year over year.
Rail intermodal volume has outperformed dry van in key corridors
Relative to last year and limiting data to outbound LA loads, international intermodal volume (white) and domestic intermodal volume (red) outperformed long-haul truckload tender volume (yellow) and dry van truckload tender volume (green). (Chart: SONAR)
Intermodal volume has been solid in both the international and domestic segments. In the past week, for the U.S. as a whole, loaded containerized domestic intermodal volume is up 4.9% year over year, while loaded international intermodal volume is up 9.2% year over year against a more difficult year-ago comparison. That’s far better than the dry van tender volume described above and important in the context of the U.S. truckload market because it appears that rail intermodal has taken share in some dense corridors where intermodal has an established presence. The SONAR chart above illustrates the stronger growth in intermodal volume outbound from LA, relative to both dry van tenders and long haul tenders from the same region. It appears that a pull-forward of imports has reduced the time sensitivity of many loads, making intermodal a more viable option. In addition, major domestic intermodal companies have ample levels of unused containers currently, which can be thought of as an indicator in intermodal capacity.
Ocean rates are sinking
In recent weeks, ocean spot rates have come down sharply from China to the U.S. West Coast (orange) and U.S. East Coast (white). (Chart: SONAR)
Ocean rates remain elevated relative to historical levels and relative to levels before the Red Sea attacks started in late 2023. But they have come down sharply in recent weeks and are near a 52-week low. The rates in the chart above are for China-to-U.S. trade lanes, but the trend is not specific to U.S. imports as ocean rates have fallen globally in a similar manner. Ocean capacity has returned to the market stronger than demand following Chinese New Year, but SONAR is not yet showing a drop in U.S. import bookings at overseas locations, which remain above year-ago levels. However, a drop in U.S. import bookings may be coming later in the year to reflect the aftermath of the tariff-related pull forward. In addition, there are arguably more factors that could put downward pressure on ocean rates than factors that could do the opposite (see article: Will ocean rates collapse?). An eventual falloff in imports could lead to a decline in truckload and rail intermodal demand originating at U.S. port cities.
Ocean bookings for U.S. imports, taken at overseas locations, remain above year-ago levels, suggesting that shippers are still pulling shipments forward ahead of potentially higher tariffs. (Chart: SONAR)
