The signs indicating a market upturn are there, according to most trucking industry analysts — but the rates haven’t responded yet.
Why? The answer is simple: There are still too many trucks available to haul shipment numbers that remain stubbornly low.
According to the Federal Motor Carrier Safety Administration, more than 4,000 carriers left the industry in February 2024. At the same time, more than twice that many registered as new carriers. Adding more trucks to a market that’s already oversaturated isn’t likely to push rates upward; there is still too much supply.
On the demand side, things may be looking up.
According to Motive, a marketer of AI safety and technology products, trucking visits to warehouses for the top 50 retailers increased by 1.2%. The March Motive Economic Report indicated department stores and electronics saw “significant surges” while home-improvement store visits were up 14.6% from February 2023 levels.
“Nearshoring” is a word that is increasingly heard around the trucking industry. The term is used to describe companies that move manufacturing or warehousing facilities to another country that’s closer to the country in which they want to sell their products. For the U.S., Mexico is becoming more popular as companies move their facilities from China and other Asian countries to new plants closer to the U.S.
According to Motive, the number of vehicles registered for cross-border shipping grew by 14.3% last year, an indication that carriers are gearing up for more freight coming from Mexico. The impact for trucking may be fewer shipments from Asia going to west coast ports, resulting in fewer truckloads from the west coast and more freight from facilities along the U.S.-Mexico border.
The Motive report concludes with a prediction that the second half of 2024 will be “a more carrier-friendly environment.”
Poor January weather conditions reduced shipment numbers, so gains made in February mostly reclaimed the ground lost a month earlier. The American Trucking Associations (ATA) reported that its For-Hire Truck Tonnage Index increased 4.3% in February after falling 3.2% in January.
“February’s level was the highest in a year, yet the index still contracted from a year earlier, suggesting truck freight remains in a recession,” said ATA Chief Economist Bob Costello.
The February ATA Index fell 1.4% compared to February 2023. It was the 12th consecutive month that came in lower than the same month a year earlier. The ATA index includes data received from its membership and represents mostly contract freight shipments.
Spot rates, on the average, increased by a penny for flatbed freight in February, according to DAT Trendlines published by DAT Freight & Analytics. Average rates for dry van and refrigerated loads, however, fared worse. The inclement weather that reduced shipments in January had a positive effect on rates, rising to an average of $2.15 per mile for dry van and $2.57 per mile for refrigerated. Once the weather improved in February, average spot rates dropped by nine cents for dry van to $2.06, while refrigerated rates dropped 15 cents to an average of $2.42 per mile.
The Cass Freight Index for Shipments rose by 2% on a seasonally adjusted basis in February, possibly assisted by the extra day in the month due to it being a leap year. Compared to February 2023, shipments were down 4.5%, an indication that increases haven’t yet made up for recent declines.
Tim Denoyer, who authors the Cass report and is vice president and senior analyst at ACT Research, noted the 4.5% decline was the smallest in 10 months. For the entire first quarter of 2024, Denoyer expects the total freight index to rise about 3% from the last quarter of 2023, a positive sign that things are getting better.
“With destocking playing out and goods consumption rising, we see this improvement as an encouraging sign that a recovery is beginning,” Denoyer wrote.
The Cass Truckload Linehaul Index, comprised of shipment and expenditure numbers from Cass clients, rose a tenth of a percent in February after falling 0.6% in January. Compared to February 2023, the index fell 5.4%. Again, the decline was the smallest of the past year, indicating things are getting better. The index includes both spot and contract freight.
Denoyer pointed out that new EPA regulations that go into effect in 2027 will likely harm freight rates in the near term. The reason for this, he says, is that carriers are starting to buy additional equipment now to avoid expected $30,000 price increases that will take effect in 2026. As the mandate gets closer, the pre-buying will accelerate — but for now, it’s difficult to get excess capacity out of the freight market if carriers are increasing the number of trucks they plan on buying.
“These capacity additions suggest the long bottom in the freight cycle may lengthen even further,” Denoyer wrote.
A Feb. 29, 2024, blog post by ACT Research claimed that rising imports and intermodal trends are key indicators of a recovery in trucking for 2024.
“The truckload CEOs we interviewed at ACT’s seminar on Feb. 21 (ACT Market Vitals, February 20-22, Columbus, Indiana) are seeing volumes improve enough to get more selective on freight mix, but this demand is not finding its way into the spot market yet,” Denoyer said.
ACT also reported that driver availability improved again in February, likely due to small carrier revocations as owner-operators shut down their businesses and rejoin the driver market. That’s a trend that’s likely to reverse once freight rates begin to increase.
The second half of 2024 could see the trucking industry turn the corner. Rising freight rates would be a nice way to help carriers keep up with the inflation that’s raising the cost of everything else.
Cliff Abbott is an experienced commercial vehicle driver and owner-operator who still holds a CDL in his home state of Alabama. In nearly 40 years in trucking, he’s been an instructor and trainer and has managed safety and recruiting operations for several carriers. Having never lost his love of the road, Cliff has written a book and hundreds of songs and has been writing for The Trucker for more than a decade.
