The truck transportation market in the US has a natural oscillation between supply and demand for trucked shipments, driving freight pricing up or down. This is normal and has happened for decades. In this overview, we'll look at the trucking industry's current trends and future projections that interplay with the broader supply chain landscape.
We have been riding roller-coaster oscillation through the pandemic when demand increased sharply at the end of 2020, driven by increased consumer demand for goods, then cooling quickly at the end of 2022 as consumer demand slowed, driven by inflation and concerns about a recession.
Full truckload rates have cooled back down over 2023. They are now to a point where the profitability of the industry is not enough to sustain many companies, so the oversupply of trucks will constrict as companies continue to close their doors.
We have seen this market behavior throughout 2023 as companies we spoke to reported that important and long-standing trucking relationships evaporated as companies abruptly closed their doors, leaving shippers scrambling for other trucks to pick up their loads or to pull together inventory to cover a load that was abandoned along the way.
There is insightful data available from DAT and CH Robinson on truck freight rate trends, load-to-truck ratio (an indicator of demand), and general freight trends in the US. Many companies track this data to better understand the market dynamics that could drive the need for contract strategies to maintain cost, service, or drive improvements.
According to these sources, the impending shift will most likely start in the middle of 2024 and evolve into 2025. This means that full truck freight rates will begin to tick-up in the middle of 2024 as capacity slowly rebalances. There are indicators that the shift could be slow because new trucks are still being delivered to market, and companies with healthy balance sheets are taking advantage of used equipment as prices soften. Additionally, while there is plenty of trucking equipment, there is still a general shortfall of drivers, and driving networks continue to evolve so that hauls are shorter so drivers can be home with their families more frequently. This will continue to increase costs for long-haul freight.
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Additionally, we have heard from several other third-party logistics (3PLs) that the reverberations in the LTL market from the YRC/Holland bankruptcy hasn’t been as severe as feared. Spot rates increased 7-12% as other carriers absorbed last-minute bookings, but there was open capacity in the LTL market before the closure, so capacity is rebalancing and healthier companies are taking-on terminals and equipment.
The bottom lines:
- Full Truck freight will continue to be soft (where it is today) for the next 6-9 months, and we will continue to see carriers close their doors as their cash flow becomes troubled.
- We recommend that you ensure your key full truckload carriers are sustainable by working with them to understand their financials and how they are working through this down period. If you identify carriers at risk of a financial collapse in the next 6-12 months, begin putting new partners in place. It's a good time to be contracting new freight.
- Less-than-truckload freight also does not appear to have enough demand to justify significant cost increases. That said, the dynamics differ from full truckload because so much of the LTL cost structure depends on terminal throughput.
- If you are shipping multi-pallet shipments on LTL, it might be worthwhile to understand how full truck freight could compare. Depending on the freight lane (what origin to what destination), it may be more economical to ship 6+ pallets in a full truck rather than LTL.
For more data and information, we recommend checking out the following resources:
Freight Market & Rate Trends | North America | C.H. Robinson (chrobinson.com)
Trucking Industry Trends - DAT
We have seen that the North American trucking market continues to be in the complex phase of supply and demand fluctuations. While challenges persist, recent insights and projections indicate a gradual shift starting in mid-2024. Full truck freight rates are expected to rise as capacity rebalances are influenced by factors like new truck deliveries, used equipment utilization, and driver shortages. While your organization navigates these changes, Waypost Advisors' Supply Chain consultants are ready to assist your team in strategically adapting to the transforming supply chain dynamics.
Waypost Advisors is an end-to-end supply chain and resourcing solution. We offer expertise in procurement, inventory, project management, planning, transportation & warehousing to fit the needs of your B2B manufacturing or distribution company. Our advisors can provide you with the resources and expertise to tackle your supply chain challenges while allowing you to still focus on running your business.