SoCal Tenders' Monumental Role In US Truckload Landscape
The Southern California truckload tenders have plummeted, creating a ripple effect across the US freight industry and potentially the broader economy.
- SoCal truckload tender volumes are 23% lower than April 2019, pre-pandemic levels.
- Los Angeles and Inland Empire freight volumes create a nationwide imbalance.
- Global container freight rates have dropped significantly.
- Current freight rates are driving companies and independent operators out of business.
SoCal Tenders’ Role in Freight Demand
Southern California is vital for domestic truckload outlooks in the next quarter. Most import flows from Asia enter the US via Los Angeles. When SoCal tender volumes decrease, the rest of the country follows. Currently, SoCal tenders are down 23% compared to pre-pandemic levels. Monitoring SoCal is crucial for anticipating nationwide trends.
In November 2021, the Los Angeles to Chicago spot rate was $2.98. The return trip rate was $1.63, showing headhaul and backhaul relationships.
Now, rates have flipped dramatically. The LA to Chicago rate is $1.50, while the return rate is $1.71.
During the pandemic, carriers offered low inbound LA freight rates. This strategy secured enough capacity and was offset by higher outbound rates. Contract market rates have not yet rebalanced, partly due to lower rate expectations from shippers.
The market now faces low demand, network imbalance, and severe pricing imbalance. This situation affects carriers and shippers alike.
Container Freight Rates Plummet
A tweet from market strategist Charlie Bilello highlights the nosedive container freight rates have taken since their peak in September 2021. The cost of a 40-foot container has dropped from $11,109 at its peak to just $1,406, even lower than the pre-COVID rate of $1,468.
Freight Rates Impacting Businesses
As freight rates reach all-time lows, many companies and independent operators face significant challenges. With the average cost per mile to operate a truck at around $1.65, freight rates dipping below $1.55 are causing businesses to struggle or shut down entirely.
Transportation managers must continue to monitor rates and service in and out of SoCal over the next year. Cheap inbound lanes could be exposed if the market takes a turn.