Truckload spot rates averaged $1.28 per mile in the second quarter, a four-year low, per Bank of America. (WendellandCarolyn/Getty Images)
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A timeline for a rebound in freight rates and market conditions remains muddy into the second half of 2024, according to executives and analysts, with November’s presidential election further obfuscating the outlook.
The freight sector has plateaued, with no shift lower in rates or activity, Estes Express Lines Chief Operating Officer Webb Estes told Transport Topics on July 23.
“Where we are is difficult to tell. How the next six months plays out is also difficult to tell,” he said.
Richmond, Va-based Estes Express Lines ranks No. 11 on TT’s Top 100 list of the largest for-hire companies in North America and No. 4 among less-than-truckload carriers.
“I would tell you this looks and feels more like pre-2020,” J.B. Hunt Transport Services CEO Shelley Simpson said during a July 16 analyst conference call. “We’re all just a little bit hesitant. We’ve had some false starts over the last couple of years, and we just want to make sure that things are steady and that we can see a clear line of sight.”
Jeffrey Fleming, general manager of freight network at Purolator, agrees.
“We’re at a reset point. Although our core competitors have seen a rise in volume, this is offset by a drop in weight per shipment,” Fleming said July 24. “Managing competitive pricing and capacity effectively is essential. We’re starting to see volumes return to pre-pandemic levels.”
Mississauga, Ontario-based Purolator ranks No. 19 on the for-hire TT100.
Truckload spot rates averaged $1.28 per mile in the second quarter, a four-year low, according to Bank of America Research Analyst Ken Hoexter.
“We don’t know when the cycle will shift and aren’t going to make a prediction,” said Spencer Frazier, J.B. Hunt’s executive vice president of sales and marketing, during the second-quarter 2024 earnings call.
J.B. Hunt ranks No. 3 on the for-hire TT100. It also is the No. 2 truckload/dedicated hauler and top-ranked intermodal/drayage carrier.
Industry analysts are scratching their heads about the outlook.
“We’re entering another unusual stage in the freight market as the market bounces along the bottom of a trough. The challenge is we may be here for some time to come,” DAT Freight & Analytics Principal Analyst Dean Croke wrote June 25.
The challenge is we may be here for some time to come.
DAT Freight & Analytics Principal Analyst Dean Croke
“Not only are truckload carriers aggressively calibrating truck counts to match softening demand, but they’re also ordering more new trucks from factories ahead of the 2027 [U.S. Environmental Protection Agency] Clean Trucks Plan, which could add as much as $30,000 to the cost of new trucks,” Croke said. “The flow-on effect is more used trucks hitting the market and lower used truck prices, making it attractive for new capacity to enter the market when it is already oversupplied.”
FTR Transportation Intelligence Vice President of Trucking Avery Vise concurs.
“Trucking is in the initial stages of a recovery, although it might be months before market participants perceive much change,” Vise wrote July 18 as the research group released its month’s Trucking Conditions Index. “We expect rates to be mostly stable overall through late this year with spot rates leading the way. However, the capacity overhang remains large and will delay anything that could remotely be called a rebound.”
The presidential election is compounding the uncertainty. President Joe Biden ceding the expected Democratic nomination, likely to Vice President Kamala Harris, means the implications of November’s trip to the ballot box are murkier than usual, fourth-generation trucking executive Estes said.
Still, some positive signs are emerging from data released since the second half of the year began.
Some 1,972 carriers left the market in June, a 60% increase from May, indicating improved capacity dynamics for those still operating, according to Motive Head of Strategic Analysis Hamish Woodrow. Meanwhile, 7,621 carriers entered the trucking market, which is 10% less than in May.
And on July 17, the Federal Reserve reported June factory output increased 0.4% compared with May, a second straight rise, for a combined 1.4%, and the fourth climb in the past five months. Also, output increased 1.1% compared with June 2023, the largest year-over-year rise in 2024.
The central bank’s position on interest rates, meanwhile, could play a key role in any upturn in the freight market through a boost in demand as well as voters’ mindset on the economy in the presidential election. The Fed is likely to cut rates in September, according to economists polled by Reuters.
Another rate cut is expected in December, but Estes said any impact from rate cuts is likely to be a more significant factor in 2025 than in the back half of 2024, particularly when looking at the construction industry and building products freight.
That said, the construction industry already is supportive for carriers’ prospects, said Fleming, noting the infrastructure projects underway as a result of the Bipartisan Infrastructure Law and the Inflation Reduction Act plus all-time high Canadian immigration rates.
It is not all doom and gloom, concurred Estes. “If 2021 and 2022 were a 10, and a good economy is a 7, and a bad economy is a 3, then maybe we’re at a 5,” he said.
“We’ve never seen the freight mecca we saw in 2021 and 2022,” Estes said. “Of course, we’re in a recession compared with the biggest freight boom we’ve ever seen. Did it get worse from good to bad? Or did it get worse from unbelievable to good?”
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