Report: Signs of recovery emerge in freight industry

The freight industry is cautiously optimistic this year following a challenging 2023, according to a new report. Still, some industry metrics are signaling the beginnings of a recovery amid a lingering freight recession.

FreightWaves and Trimble recently released the Q1 2024 Carrier Rate Report that highlighted existing market conditions and expectations for the year.

“This new phase is characterized by a market gradually regaining its footing, underscored by positive developments in rate dynamics and broader economic factors,” the report shows. “A critical development in the current landscape is the closing gap between dry van truckload spot and contract rates, to a level of balance not observed since the last holiday season. This trend confirms the progress made toward supply and demand equilibrium.”

Spot rates have been low for almost two years. According to DAT Freight & Analytics, van spot rates fell by 8.6% in February from the same month in 2023. February rates were down by 3.8% from January. For the week ending March 10, rates decreased by 1.1% from the previous week.

According to the Cass Transportation Index Report for February, the shipments component of the Cass Freight Index declined by 4.5% from February 2023. It was the smallest decline in 10 months. Shipments rose by 7.3% in February from January. Shipments are projected to rise by about 3% in the first quarter from the fourth quarter of 2023.

“It’s been over two years since the first (year-over-year) decline of this freight recession, and with destocking playing out and goods consumption rising, we see this improvement as an encouraging sign that a recovery is beginning,” according to the Cass Transportation Index Report. “Real disposable incomes slowed to start 2024, but goods prices are now declining overall. And with the ongoing strong labor market, freight demand fundamentals are improving.”

According to the Q1 2024 Carrier Rate Report, “companies may be navigating toward more balanced short-term and long-term truckload capacity strategies.” An analysis of Federal Motor Carrier Safety Administration data by Carrier Details shows the number of truckload operating authorities has decreased by 9,000 since Nov. 1. This marks a 12% increase in exits compared to the same period last year.

The report shows the decrease in operating authorities is significant in balancing supply with demand. The fast pace of the reduction might mean the market could shift quickly to tighter conditions.

According to the report, container volumes from China to the United States have risen to levels not seen since May 2022. The increase was in part attributed to U.S. importers restocking inventories in anticipation of stronger retail sales. Port activity, especially on the West Coast, is expected to remain strong through March. This could contribute to higher freight volumes and tighter capacity, pushing up rates.

Other trends that might bolster freight volumes include the shift to nearshoring and the ongoing U.S.-China trade tensions. Mexico recently became the United States’ top trading partner, and Mexico’s growing role in global trade is expected to contribute to rising cross-border freight volumes between the United States and Mexico.

However, headwinds include the redirection of shipping routes because of security concerns in the Red Sea and capacity constraints because of low water levels in the Panama Canal. These challenges are leading to longer transit times and tighter container capacity, pushing up spot rates for trans-Pacific shipments.

According to a recent FreightWaves survey, about 40% of carriers expect freight volumes to be flat in the first quarter. Nearly 35% of carriers expect freight volumes to be slightly higher by the end of the period. About 22% of carriers expect volumes to be slightly lower by the end of the first quarter.

The survey shows more than half of carriers expect rates and diesel prices to remain flat in the first quarter. Over the next 12 months, nearly 45% of carriers expect fleet capacity to be flat, while more than 41% of carriers expect fleet capacity to rise.

Over the next six months, half of carriers expect driver recruitment to remain about the same. Nearly 30% of carriers expect recruitment to become easier, and almost 20% expect it to become more difficult.

Half of carriers expect consumer goods demand to be the primary driver for trucking capacity in the first half of 2024. Following are other drivers: