How the Freight Market Trough Defined 2024

The trucking industry continued to be defined by a market trough this year, but one that has shown some minor signs of improvement.

The pandemic brought with it a surge in freight demand amid the resulting changes in consumer behavior. But the freight cycle eventually caught up with the boom as pandemic restrictions phased out. The resulting decline in freight demand also meant the industry had too much capacity. It has struggled to regain traction in the roughly two years since.

“Trucking is now in the longest and deepest freight down cycle since the 2007 global financial crisis,” said Michael Castagnetto, president of the North American surface transportation division at C.H. Robinson Worldwide. “A typical freight recession lasts 10 months. The previous record was 24 months. We’re now in Month 34 of this one. A multitude of dynamics will influence how long this trough continues, including capacity trends, the economy and trade policy.”

C.H. Robinson ranks No. 2 on the Transport Topics Top 100 list of the largest logistics companies in North America.

American Trucking Associations showed that tonnage has been slowly climbing since hitting a low of 111.0 points in January 2024. The latest data from its tonnage index shows it even gained 3% since that point, reaching 114.6 in October. But that still is well below where the cycle peaked at 118.8 in September 2022.

“It was a very stable year in terms of freight volume, and frankly, capacity also,” said Avery Vise, vice president of trucking at FTR Transportation Intelligence. “While it’s easing very gradually, it did not really change very much at all either. We have seen, especially at the beginning of the year, a lot more carrier failures. But that has really stabilized at this point.”

Vise noted that the past four months averaged about 400 carrier failures. But that’s compared with an average of 1,700 monthly failures throughout 2023. He stressed that doesn’t necessarily translate to capacity, but payroll data suggests larger carriers are not adding capacity.

“In fact, it probably whittled away a little bit, while the small carriers have stayed the same,” Vise said. “You have a freight environment that is slightly improved, and you have capacity that is very slightly lower. That has produced the makings of a recovery next year when we look at rates, which is really how I think most people view a recovery.”

Castagnetto echoed the point by noting the explosion of trucking firms during the pandemic has continued to ease. He anticipates carriers will continue to leave the market until capacity returns to normal levels, which could be by June. He also stressed it likely won’t be just one factor that changes the trajectory of the industry.

“Growth in freight volumes could help correct the capacity imbalance, depending on how the economy performs in the coming months,” Castagnetto said. “We’re particularly watching three key areas that drive the most freight: manufacturing, construction and retail. Industrial production has been flat for nearly two years. Housing starts are down but increasing sequentially, and we know that every home built generates about eight truckloads of freight. Consumer spending is the one bright spot for the 7,500 retailers we serve.”

C.H. Robinson is projecting that cost per mile this year will be 5% below 2023. The third-party logistics company has tracked truckload rates bouncing along the bottom of the market for most of this year but also forecasts a 9% improvement next year. Much of that growth is expected to occur in the second quarter.

“I agree with labeling it as a trough,” said Mazen Danaf, staff applied scientist and economist at Uber Freight. “I think what we saw is just seasonality being the main driver of a market with stability otherwise. So we saw the market tightening in the beginning of the year with the winter weather and all of that.”

Danaf added that the market tightening lasted through the first two fiscal quarters but then underwent some softening that continued until recently. He believes that this indicates that seasonality is back and has been the primary driver of the current market. Uber Freight ranks No. 13 on the logistics TT100.

Read the rest of the story at Transport Topics