Freight recession likely to continue into early 2025

The less-than-truckload (LTL) market is faring better but still has freight volumes below pre-pandemic levels, according to Jason Miller, logistics professor at Michigan State University, who took part in a Journal of Commerce webcast on Oct. 24.

He also said the over-the-road full-truckload market is soft at best with October spot rates down a bit from a year ago.

Miller said the earliest he sees a recovery taking shape is last in the first quarter or early in the second quarter of 2025. He said a weaker global economy does not bode well for exports and despite the higher container volume coming into the U.S. this year, there has not been an uptick in freight demand large enough to move the needle.

He attributes muted freight demand to a weaker industrial sector with fabrications and manufacturing output lower than 2023. He said even the paper industry’s production is down. This is likely due to higher interest rates and operating costs with industrial operations closely managing their output.

Miller bases his forecast on lower interest rates in the middle of 2025 that could jumpstart the construction and housing industries. He said the farm agriculture sector is also seeing weaker outputs and not investing in heavy machinery. Miller said improvements in technology have reduced the amount of machinery needed in the fracking industry. Retailers also ordered early for holiday inventory this year, which pulled forward some demand.

While the LTL market is better than other freight segments, they are not immune to excess capacity woes. The bankruptcy of Yellow in late 2023 pulled some excess capacity out of the market. William Cassidy, senior editor of the Journal of Commerce, said during the webcast., Yellow operated 343 terminals and 112 of those have not yet been sold. Cassidy said there appears to be some bidders acquiring terminals and then shuttering their own. He said parts of the Yellow business have been divided up by other carriers but a large part of it remains encumbered in ongoing bankruptcy proceedings. He also does to see the freight recession abating before early 2025.

Miller also addressed tariffs and the impact they could have on the freight industry. He said blanket tariffs on goods are negative for carriers and could be a demand destroyer. He said targeted tariffs with China could have some positives on the freight market if other countries, like those in the European Union, join the U.S. with tariffs against China.

Holly Pearce, head of logistics for Otis Elevators, said one of the biggest issues she is hearing from carriers and supply chain partners is the rise in cargo theft.

“It is hitting people everywhere. We build a smarter mouse trap and the criminals figure that out too,” Pearce said.

One way her firm is addressing the risk is by making sure the carriers she uses have a freight recovery plan in place and do the proper vetting and validation at every level along the supply chain.

“Everyone along the chain has to have skin the game and hold the other accountable. We do use spot market carriers and we do our due diligence on them as well. It’s necessary,” Pearce said.

Pearce said ocean freight rates are competitive and starting to decline. She said LTL rates continue to remain higher than others because they are more granular and specific. Her contract freight rates are also higher relative to others because they offer more personalized services than a standard over-the-road carrier.

“I appreciate the way my LTL carriers have started to specialize in their services, instead of trying to bid all the business not being able to handle it well. I want my carriers and supply chain partners to make money, but not at the expense of late or damaged deliveries that end up costing everyone,” she said.

Transportation analysts and insiders expect Federal Express to spin off its LTL business — FedEx Freight — into a separate company in 2025. FedEx Freight generated an operating profit of $1.8 billion on revenues of $9.1 billion in the company’s last fiscal year. Rival UPS sold its freight business to TFI International for $800 million in 2021, before the trucking market downturn.

Scooter Sayers, the founder of Sayers Logistics, said FedEx Freight is too large for most LTL companies to acquire outright. He said it would make more sense for Amazon or Walmart, given their wherewithal to acquire and scale the business among their own giant enterprises. Sayers also believes any recovery in the overall U.S. freight demand is likely still several months away.