Executives, Analysts See Less Cloudy Truckload Market Outlook
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The outlook for truckload freight markets and rates is less cloudy after a dismal first quarter, according to carriers and analysts.
“The industry is emerging from a challenging quarter,” said Lee Klaskow, senior freight transportation and logistics analyst at Bloomberg Intelligence. “Improved sentiment coupled with Truckstop’s rising Market Demand Index suggest [truckload] rates may move higher from here.”
According to a Bloomberg-Truckstop survey released May 8, sentiment among North American carriers operating in the spot truckload market improved in the past three months, although some concerns linger.
“The direction of rates will be driven by supply-side factors as the industry remains flush with capacity,” Klaskow added.
Klaskow
Any truckload capacity correction remains slower than expected, according to Uber Freight, which released its Q2 Market Update and Outlook Report on May 8.
However, Uber Freight warned shippers to prepare for a tighter market in the second half of the year.
“Given contract rates were 14% lower [year-over-year], history tells us the market could tighten in H2,” Uber Freight analysts observed.
Q1 could not have been much worse, according to carrier executives.
Bédard
“I would never have anticipated ’24 was going to be so rough in terms of the freight environment,” TFI International CEO Alain Bédard said during an April 26 earnings call. TFI ranks No. 4 on the Transport Topics Top 100 list of the largest for-hire carriers in North America as well as No. 7 on TT’s truckload list.
“Tonnage in March suggests that truck freight volumes remain lackluster, and it is clear the truck freight recession continued through the first quarter,” American Trucking Associations Chief Economist Bob Costello said. “In the first three months of 2024, ATA’s tonnage index contracted 0.8% from the previous quarter and declined 2.4% from a year earlier, highlighting ongoing challenges the industry is navigating.”
Costello
However, C-suite executives at some of North America’s largest haulage companies are eyeing an improvement in conditions.
“I think there is some encouragement there, and I think the read-through of [what happened in April] is that there’s not as much slack in the supply chain as there once was, and we’re getting closer to a balance of supply and demand when we see just a little bit of an uptick in demand start to eat up capacity in certain markets,” Knight-Swift Transportation Holdings CEO Adam Miller said April 24 during the company’s quarterly earnings call. Knight-Swift ranks No. 7 on the for-hire TT100 and is the top-ranked truckload carrier.
Owner-operators and small fleets polled by Bloomberg and Truckstop also are slightly more optimistic. The survey showed a majority of carriers believe better times are around the corner with Truckstop’s Market Demand Index up 9% in Q1 from last year, the first year-over-year gain after seven quarterly declines.
In addition, only 26% of respondents expect rates to decline over the next three to six months, 6 percentage points less than in the equivalent fourth quarter of 2023 survey, while 28% see rates rising, which is 6 percentage points more than in Q4.
Vise
Truckload spot rates are steadily rising and will be net positive year-on-year by the third quarter, according to Avery Vise, FTR Transportation Intelligence vice president for trucking.
Rates are set to rise 1% overall in 2024, Vise said May 9 during a webinar held by FTR on the state of the freight market.
Contract rates have bottomed out and will be net positive year-on-year by the end of 2024 but are set to fall 2% overall this year, he said.
Also, Vise expects truck loadings to rise substantially over the next two years, starting in the third quarter. Loadings are expected to rise from less than 66 million to more than 68 million, he said.
More immediately, Bank of America’s Truckload Demand Indicator for shippers’ zero- to three-month freight demand outlook increased to 56.6 in the week that ended May 2 from 52.8 two weeks earlier. BOA analysts said this is the highest level since June 2, 2022, matching the period when demand outlooks were falling in the post-COVID-demand boom period. The indicator also topped the 54.2 average during the 2012, 2015 and 2019 freight recessions, they said.
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And in the spot dry van truckload market, post volume was the highest in six weeks in the first week of May, following the previous week’s 11% end-of-month increase, DAT Freight & Analytics Principal Analyst Dean Croke wrote May 7.
Spot dry van volumes in the most recent week were around 6% higher than 12 months earlier, while equipment posts reversed course, decreasing by 8% week-over-week, resulting in the dry van load-to-truck ratio increasing 21% week-on-week to 3.81, he said in a blog.
And in the refrigerated truckload market, early-season strength in the produce market, led by California, where volumes are 18% higher year-over-year, boosted the truckload spot market after last week’s 12% increase in load post volume.
The contract market also is seeing favorable indicators.
“We are assessing signs that market conditions are beginning to moderate. For the first time in six quarters, we experienced positive contract price renewal closures in the low single digits for the truckload network,” Schneider CEO Mark Rourke said on a May 2 earnings call with analysts.
However, the truckload market has not turned the corner fully yet, with Rourke quickly noting: “While this is a promising sign, we have not seen enough to consider the market at an inflection point.”
Schneider ranks No. 8 on the for-hire TT100 and No. 6 on the truckload list.
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