The freight market has generally stabilized, with supply and demand holding steady compared to previous months, according to analysts.
According to Uber Freight’s Q3 freight market update, supply and demand in the previous quarter showed little change, maintaining a 1.2% year-over-year increase. The rise is likely attributed to a 2.3% increase in real consumer spending on goods and a 10.4% increase in containerized imports compared to previous year.
Looking ahead, Mazen Danaf, senior economist at Uber Freight, said they expect more supply to exit the market and demand to remain mostly flat.
David Spencer, vice president of market intelligence at Arrive Logistics, noted that they don’t see any meaningful changes to supply and demand outside of the longer-term trends they have seen with slow capacity exits and relatively stable demand.
Craig Decker, managing director at Brown Gibbons Lang & Company, echoed those sentiments, noting that though there have been carriers exiting the market, there’s still an abundance of available capacity, which continues to pressure rates.
From a demand perspective, Decker said consumer purchases have remained modest as result of inflationary impacts post-COVID, and industrial production has remained lackluster, leading to a diminished demand for additional capacity.
Spencer pointed out some trends worth looking into: “Reefer equipment began to separate itself from van equipment in Q3 last year as seasonal harvests led to elevated rejection rates, particularly around Labor Day. We are expected similar challenges this year.”
Shippers are also continuing to chase rate discounts in early Q3 RFPs that could lead to more challenges for carriers and accelerate exits once they go live, he said.
Spencer added that containerized imports are surging, leading to increased traffic on the rail lines. “This has not yet bled over into challenges for shippers and increased truckload rates outbound from ports such as Southern California, but if imports continue at this pace, we could see port regions heat up, especially if labor challenges progress with the East and Gulf Coast ports," he said.
Harold Daggett, president of the International Longshoremen’s Association, which represents union workers at East and Gulf Coast ports, said in July that the likelihood of a strike is increasing, due to disputes over automated truck gates.
From the demand side, Decker said there is uncertainty as to which administration will prevail in the November election and the policies that will be employed. “This results in a status quo (or even slowdown) in spending, which has no (to negative) impact on demand for trucking supply," he said.
Decker added that pro-spending policies and a reduction in government regulations on key industries will spur industrial production, followed by the addition of capacity to the market as carriers chase a demand-driven environment.
Staying ahead
Danaf said his firm doesn’t see a lot of volatility in the current market aside from seasonality. “We expect some tightening in Q4, mostly driven by peak season,” he said.
However, Danaf pointed out that carriers should prepare for a potential market turn in 2025, especially as the capacity correction continues. “Carriers, especially the small ones, should keep track of their operating costs – including equipment depreciation and deadhead – to ensure that their rates are sustainable in the long term, especially if the market remains soft.”
Looking at freight rates as the year rolls along, Spencer expects it to follow a similar trajectory as the second half of 2023, but at slightly elevated levels and following normal seasonal patterns. One exception that concerns Arrive Logistics is in the West Coast and Southern California, following elevated containerized imports and labor concerns at East and Gulf Coast ports.
Spencer said that a continuation of relatively poor trucking conditions and a subdued spot market should lead to a continuation of driver exits and increased vulnerability to disruption as 2025 progresses.
