November 2023 Freight Market Update

Stay up to date on the latest information on conditions impacting the freight market, curated by Trinity Logistics through our Freightwaves Sonar subscription.

FLAT RATES, EXCEPT FOR LTL

Much of what we have seen this year has been around carrier rates remaining relatively flat. Apart from a few seasonal or holiday peaks, and a slight up or down influence due to fuel costs, spot rates and contract have been stagnant. As you can see in Figure 1.1, the green line has hovered between $1.70 and $1.80 for the past six months.  

Less-than-truckload (LTL) rates, one would reason, would follow a similar pattern as they typically follow truckload rate movement with a few months lag. In the past few months, as indicated by the blue line in Figure 1.1, there has been an acceleration in LTL contract rates. As you probably recall, one of the larger LTL carriers, Yellow Corporation, filed for bankruptcy in August and ceased operations. 

One may ask, “Well, why would rates elevate when the LTL industry was operating at less than capacity and nothing has caused an influx of new LTL freight?”  

Yes, the remaining national and regional carriers were, based on available capacity on the books, able to absorb the freight Yellow was moving with no additional investment in equipment or labor. But just because the available resources are there, does not mean they are positioned in the places where service was needed.  

This has necessitated LTL carriers realigning their network to move the freight that Yellow was doing prior. The more prevailing reason for rates to increase is the aggressive nature in which Yellow competed for the freight they were servicing. Typically, Yellow’s rates were far more discounted than most.  

So, while the remaining LTL carriers in the network were able to position their fleets to handle the volume, they did not offer the same discounted rates that Yellow did. When you bundle all these factors together, you get rates increasing by about 10 percent in the last several months and I would not anticipate that 10 percent increase being reversed anytime soon.  If anything, look for those annual general rate increases to happen as we embark on a new calendar year. 

SUPPLY & DEMAND BALANCE IN 2025?

In prior monthly updates, we have highlighted the current freight environment being one of more supply than demand. Suffice to say that truckload freight volumes have been relatively unchanged over the last 12 months and carriers are saying “yes” to almost every shipment offered to them on the contract side.  

This has resulted in less freight hitting the spot market and has helped to keep rates at levels that are $0.70-$0.80 less than contract rates. When will there be better balance?  A great illustration of this from FTR in Figure 1.2 tells the story.  

As you can see, the driver labor index sits well above the truck loadings index and has been for the past two years. When you factor in prospects for freight volumes to accelerate, economic conditions, and the pace at which carriers are exiting the market, it will most likely be 2025 before balance returns.  

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