Carriers Prioritize West Coast: A Closer Look at the Shifting Market Dynamics

The truckload market has witnessed a significant shift in carrier prioritization, with carriers favoring the West Coast over the East Coast. This trend, which began in the third quarter of 2022, has led to a marked increase in outbound tender rejections in the Los Angeles market, while Chicago has seen a higher rejection rate. This article explores the reasons behind this trend and its implications for the industry.



Rate Increases and Longer Average Length of Haul

One of the primary factors driving carriers' preference for the West Coast is the rate increases and longer average length of haul. According to SONAR's TRAC providers, spot rates from Los Angeles to Seattle have risen by 10% year over year, while contract rates have increased by approximately 2%. In contrast, spot rates to Chicago have been more volatile but are currently more than 30% higher than they were at this time last year. The longer average length of haul on the West Coast makes it a more financially viable option for carriers, despite the higher rates.

Port Congestion and Infrastructure

The Port of Los Angeles has been investing in infrastructure projects to support further growth, such as the $73 million Pier 400 Corridor Storage Tracks expansion and the $234 million Terminal Island Maritime Support Facility Project. These investments aim to improve efficiency and reduce congestion, making the West Coast a more attractive option for carriers. In contrast, East Coast ports have faced operational inefficiencies and congestion, leading to delays and higher costs.

Labor Negotiations and Uncertainty

Shippers have been routing more cargo through East and Gulf Coast ports due to uncertainties over the direction of West Coast longshore contract negotiations. This uncertainty may lead carriers to prefer the more stable West Coast market, further driving the trend of prioritizing the West Coast.

Weather and Climate Change

Weather plays a significant role in carriers' network balancing decisions, as it can impact truck operations and port congestion. In the short term, extremely low temperatures and snow or ice in areas lacking the necessary infrastructure can contribute to tighter-than-average conditions across the Eastern half of the U.S., making it more challenging for carriers to operate. In the long term, climate change could exacerbate these weather-related challenges, potentially making certain regions less attractive for carriers to operate in.



Implications for the Industry

The shift in carrier prioritization towards the West Coast has significant implications for the truckload market. As carriers continue to favor the West Coast, we may see further increases in outbound tender rejections in the Los Angeles market and higher rejection rates in Chicago. This trend could lead to increased congestion and operational challenges on the East Coast, as carriers prioritize the more financially viable and stable West Coast market.

In conclusion, the truckload market's shift in carrier prioritization towards the West Coast is driven by a combination of rate increases, longer average length of haul, port congestion and infrastructure, labor negotiations, and weather-related challenges. As the industry heads into a potentially more volatile trucking environment in 2025, carriers will need to carefully balance their networks to maximize profitability and efficiency.