Carriers have a West Coast bias

As we’ve discussed previously, much of the long-haul freight demand from the West has shifted to rail, with intermodal capturing a large share from the truckload sector. Shippers have been bringing goods into the U.S. well ahead of fulfillment needs, allowing more flexibility in how freight is moved across the country.

Intermodal influence

Loaded container volumes moving by rail (ORAILL) out of Los Angeles remain up year over year, even though they’ve dipped in recent weeks alongside declining import levels. Meanwhile, long-haul tender volumes (LOTVI) out of Los Angeles are down a staggering 26% annually.

Intermodal is a slower but more cost-effective alternative to trucking — both attractive options in an environment of shrinking warehouse capacity and cost. In many cases, intermodal serves as a form of mobile storage.

This shift helps explain part of the East-West truckload rejection rate disparity. Without sufficient transcontinental freight, carriers operating out West may find themselves stuck without balanced return loads.

Strategic carrier behavior

Despite the demand drop, some carriers may be gravitating toward the West Coast due to operational advantages. The average length of haul out of Los Angeles still exceeds 800 miles — down from 900 miles last year — which can result in better truck utilization and higher revenue per load.

Rates are also compelling. According to SONAR’s TRAC and invoice data, spot rates in many major Southern California lanes are at or above $3 per mile. Current averages include $3.29 to Denver, $2.97 to Salt Lake City and $2.92 to Phoenix.

In contrast, rates from Atlanta to Chicago averaged about $1.78 last week (a 24% increase from the week prior). Atlanta to Harrisburg — typically an expensive, high-volume lane — was $2.42, while loads to Dallas were averaging $1.94.

While rates per mile aren’t directly comparable due to differing lane lengths and demand imbalances, it’s clear that carriers are earning higher margins per load out West — even with lower demand.

Capacity and profitability pressures

Utilization is a key driver of carrier profitability, though it’s not directly visible in macro-level data. Without enough transcontinental freight to rebalance trucks, carriers may end up taking any available load — or staying in the West, drawn by stronger rates.

Tender data also shows where markets are tightening the most. The latest key market trends map highlights tightening in the Savannah, Georgia, and Jacksonville, Florida, areas, along with Houston (outside the Southeast but still port-influenced). All are heavily impacted by maritime freight.

The final wave of import pull-forward activity in April reached the East Coast in early May. This could be straining capacity, especially if much of that freight is moving through the spot or transactional markets, which may not be fully captured in tender data from a demand perspective as it is heavily biased toward contractual agreements.

Final thought

While much of this analysis is inferred, one point is clear: A significant reduction in truckload capacity over the past year has made the market more vulnerable. Even with a somewhat bearish outlook for demand, the truckload sector appears increasingly reactive — and poised for volatility.

About the Chart of the Week

The FreightWaves Chart of the Week is a chart selection from SONAR that provides an interesting data point to describe the state of the freight markets. A chart is chosen from thousands of potential charts on SONAR to help participants visualize the freight market in real time. Each week a Market Expert will post a chart, along with commentary, live on the front page. After that, the Chart of the Week will be archived on FreightWaves.com for future reference.

SONAR aggregates data from hundreds of sources, presenting the data in charts and maps and providing commentary on what freight market experts want to know about the industry in real time.

The FreightWaves data science and product teams are releasing new datasets each week and enhancing the client experience.

To request a SONAR demo, click here.