Surface Transportation

All-inclusive truckload pricing in March fell 6.5 % from a year prior and 21.6 % from March 2022 . Shutterstock . com

US truckload exits slowing , LTL pricing ‘ normalizing ’ in second quarter

By William B . Cassidy

The “ worst ” of the two-year freight downturn appears to be over , but not all sectors of trucking are recovering at the same speed , analysts said during a Journal of Commerce webcast April 11 .

In the truckload sector , the exodus of small trucking companies is slowing and the number of companies entering the business is rising as freight demand slowly improves , according to Dean Croke , principal analyst at DAT Freight & Analytics .

“ We have seen the worst of the worst in terms of spot market capacity exiting ,” Croke said during the webcast .

Croke cited Federal Motor Carrier Safety Administration data that showed the net loss of carriers in March was 303 companies , compared with 1,439 in February .

In March , 7,523 companies either received new operating authorities or reactivated authorities , he said . In comparison , 7,826 trucking companies had authorities revoked .

“ We ’ ve seen three months of consistent data that show the rate of exits is slowing ,” Croke said .

The number of carriers shutting down dropped 12 % over the first quarter , he noted , while the number of new or reactivated truckload carriers jumped 20 %. New carriers or those that are reactivating their authorities are entering the business with lower operating costs due to lower used truck prices , Croke said .

“ There is definitely a sense in the market that the worst is over , and we ’ re gradually starting to pull ourselves out of this ,” he said , referring to a cyclical freight slump that has lasted two years .

A tale of two markets

That doesn ’ t mean the truckload market is on the edge of a turning point in terms of the spot market or contract pricing . Spot rates continue to bounce along the bottom they hit last fall , and contract rates are still falling , albeit more slowly than in 2023 , Croke said .

“ Shippers still have pricing power ,” he said . “ We haven ’ t seen the floor yet on the contract side , but we do see the rate of decrease slowing .” Croke believes the inflection point in truckload pricing that carriers anticipate — and shippers dread — may come late in 2024 .

“ If spot rates have bottomed out then in four to six months you should see contract rates begin to do likewise and start to increase , and that coincides with the tail end of the truckload peak shipping season in October and the holiday retail season ,” he said .

By contrast , the LTL market is “ normalizing ” at a more elevated pricing level because “ the biggest spoiler ” — Yellow — “ went out of business ,” Kevin Day , president of AFS Logistics , said during the webcast .

Rates did jump because of Yellow ’ s failure , “ but well into 2024 , there ’ s still capacity in the LTL space ,” Day said .

Excess capacity in LTL is not necessarily a bad thing , however . LTL carriers try to build 20 % to 30 % excess capacity into their networks to keep freight docks from getting congested and to leave room to grow .

The cost per pound of LTL shipments has gone up nearly 60 % since 2018 , according to the TD Cowen / AFS Logistics freight index , Day said . “ That ’ s a huge number to digest as a shipper ,” he said . The AFS truckload rate index , meanwhile , is only up 4.8 % from January 2018 .

“ There are different cost drivers in the LTL space ,” Day said . “ LTL pricing is inflationary year over year and the only time I haven ’ t seen that was in 2008 – 09 .”

36 Journal of Commerce | May 6 , 2024 www . joc . com