November 2024
Signal Color: Green
We are not anticipating any major changes or disruptions in the immediate future.
Market Status
The Truckload Market shows signs of gradual recovery, with Contract and Spot Rates stabilizing. While demand remains below pre-pandemic levels, we’re witnessing a balancing trend in volume.
Key Trend
Diesel prices below $4/gallon have steadied the carrier market, with exits and entries approaching pre-pandemic levels. However, any surge in diesel prices could affect rates and carrier availability.
Seasonal Advice
Expect rate hikes for shipments to the Pacific Northwest during the holiday season, especially for Christmas tree transport, Nationally, pricing fluctuations may continue into January.
Demand View
Contract Freight
The current ATA Tonnage Index* has a base level of 100 beginning in 2015. This month’s release shows September’s tonnage data equaling 113.2 which means that the amount of contract freight being hauled in the U.S. is 13.2% higher than it was in 2015. Last year’s data for September shows the level at 113.9 putting us 0.9% lower in the current year.
This is not exciting news it is important to compare this to the change between September 2022 to September 2023. The index dropped from 118.7 in 2022 to 113.9 in 2023 resulting in a 4.1% decrease. The ATA’s top economist, Bob Costello, noted that the decrease was the largest year to year decrease in in the index since November of 2020. This is significant as September 2022 was the most recent high point and we have not had this sort of year over year drop since September 2022 to September 2023.
However, tracking the month-to-month changes is more meaningful to get an idea of how the truckload market is trending recently. The month-to-month change from August to September of this year shows that truckload data decreased 2.1% from 115.6 to 113.2. This drop is significant because the 2.1% decrease erased the previous two months total gain of 2.1%. In other words, right now with the September data available, we’re right baack to where we were in June 2024 in terms of truckload volumes. Costello has described freight as choppy this year which you can see played out in the ‘W’ shaped trend from month to month in the index.
Spot Freight
Contact freight does make up most of the freight in the country, so the ATA index is a good. representation of the truckload market in general. However, it is worth nothing that the drop in the number of spot market truck posts and load posts are in low double digits when compared to this time last year according to the DAT.
*What is the ATA Tonnage Index?
The American Trucking Association’s (ATA) For-Hire Truck Tonnage tracks the total load weight in tons hauled by trucks in the United States. It is based on the results from their surveys given to their truckload carrier members, who haul primarily contract truckload freight. The group has been publishing the index since 1973. When we are dealing with numbers in the billions, an index level makes the information more digestible. For perspective, trucks hauled 11.46 billion tons of freight in 2022 which is 72.6% of tonnage carried by all modes of domestic freight transportation. The ATA says that trucking can be viewed as a “barometer of the U.S. economy”. We can get a feel of how the U.S. economy is trending, as well as the truckload market in general, by studying this index.
For simplicity we are only tracking their Seasonally Adjusted Index which accounts for seasonal impacts such as produce season. It removes the effect that a large influx of seasonal freight might have.
Fuel And Its Impact
Fuel Pricing
The national average diesel price* reported on Monday, October 28, was $3.573 per gallon. This is a two-cent increase from the previous week when it equaled $3.553. The national average diesel price per gallon in the United States has been hovering below $4 per gallon since the end of April this year. The increases and decreases in the price since then have not been large, only moving 2% in either direction.
Diesel Fuel Impact on Carriers
How diesel prices are trending is important as it accounts for roughly 65% of a carrier’s operating cost according to analysis from DAT Analyst Dea Croke. While the national average diesel price may not have a one-to-one relationship with how many carriers stay in business it does have a large impact on their bottom line. The last time diesel prices went above $4 per gallon and remaind there was the period from the second week in February 2022 until the start of May 2023.
In fact, for a large part of 2022, diesel was around $5 per due to the impacts of the invasion in Ukraine. This time may have exposed the carriers who were not able to manage their operating costs efficiently and caused them to operate at a loss. It wasn’t until the carrier data was available for the 4th quarter of 2022 that we saw the impact of this sustained price increase; for the first time in almost two years more carriers were exiting the market than entering. These high diesel prices had a delayed negative effect on the number of active trucking companies. After this point in Q4 2022, the trend in the change of the number of carriers was a decline for every quarter since then, not growth as seen before this point.
*National Average Price for Diesel
The Energy Information Administration (EIA), a U.S. federal agency, tracks fuel prices weekly and publishes the National Average Price for diesel and gasoline on Monday evenings.
Carrier Data
Authority Data* - Amount of For Hire Carriers
There is always an ebb and flow of carriers entering and leaving the ‘for hire interstate market’ space due to many factors, not just the price of diesel fuel. While some analysts look at brad new additions vs reinstatements and separate then, for simplicity we are grouping them together and just calling them entries. When a carrier loses their authority, it is called a revocation, which we’ll refer in total as exits.
Exits outweighing entries decreases the number of active carriers overall. This is show in the chart below by the orange line being higher than the blue line in the chart below. It’s worth nothing that carriers did stop entering the market, but they were entering in smaller numbers.
You can get a clearer view of whether the number of for-hire carriers is increasing or decreasing in total by looking at the difference between entries and exits. The difference is plotted on the column chart below by quarter and shows a green column for when the number of carriers increasing overall and a red column for the quarters where the number of carriers is decreasing overall.
The total change in the number of carriers for the past two quarters is showing that the number of carriers is leveling off, relative to the amount of demand in the market. While we are not seeing huge numbers of exits, the market is slowly working its way through the large increase of carriers that entered from 2020 to Q3 2022. The total change in carriers during this time was an addition of 137,404 carriers. In contrast from Q4 2022 to Q3 2024, the total change was a decrease of 40,715 carriers. The most recent monthly data from September 2023 saw 6,829 additions and 8,248 exits totaling a change of net decrease of 1,419 carriers in the interstate trucking carrier population (not shown in graph).
There are currently 96,689 more carriers that have registered or registered their authority than we did at the beginning of 2020. The most recent span of consecutive above $4 per gallon fuel prices (after 2022) was from the end of July 2023 to the beginning of December 2023. This 19-week run might have helped to cause the most recent low point of 7,239 carriers exiting in Q4 2023. The national average diesel price has not been above $4 per gallon since the middle of April this year. This may explain the slowed down exit of carriers since the low point of Q4. It is likely there will not be a meaningful exit of carriers to change the truckload market overall until we see a sustained run of diesel prices above $4 per gallon for at least two to three months.
*Federal Motor Carrier Association
To track the number of trucking companies, or carriers active in the market, we’ll look at data form the Federal Motor Carrier Association. The FMCA is the agency that trucking companies must register with to legally haul freight from state to state, thereby gaining permission to do so in the form of their “interstate authority” or authority for short. Unfortunately, a trucking authority doesn’t specify the number of tractors or trailers that are registered with a given motor carrier number or MC for short.
Rates
The Truckload LInehaul Index uses January 2005 as the base month with a level of 100. recent truckload invoice data shows us rates have been stabilizing lately and are doing better than at this same time last year. The authors concluded that truckload linehaul rates increased 0.3% from August to September thsi year which is the first month increase after four straight month-to-month decreases.
The year-to-year decline of 3.5% between September 2023 and September 2024 is considerably better than the September 2022 to September 2023 year-to-year 15% decrease in rates. Both measures imply that prices are leveling off on a large scale and not likely to increase or decrease greatly, unless there is some type of dramatic event that impacts the truckload market.
Freight rates are the result of supply and demand. while shippers have enjoyed pricing control and were able to keep rates low for the last two years, roughly due to the large entry of carriers from 2020 to 2022, that is very slowly starting to change. It is important to emphasize the slow part of the previous statement. While many were largely caught off-guard during the pandemic, a lot of the metrics, such as the FMCSA data previously described, tell us that we are recovering in a very back and forth kind of manner. The authors of this index don’t believe that there will be positive year over year comparisons until 2025. We will know a lot more after the month of November and the U.S. election.
*The Truckload Linehaul Index
Cass Information Systems is the largest automated payer of Freight Bills. They publish their Truckload Linehaul index monthly, which includes data from invoices for both contract and spot truckloads. Their goal is to measure the change over time in linehaul rates, without accessorial fees or fuel included.
Seasonal Considerations
Thanksgiving and the Pacific Northwest
Compared to a few months ago we are seeing increase activity on the DAT load boards in the Pacific Northwest Region (PNW). If you’re shipping to the PNW please be aware that rates will be increase at least through December. Christmas tress will start to ship out of this region and this may pull capacity for possibly all three major equipment types out of nearby areas such as Northern California and Nevada, increasing rates. Traditional seasonality with increase shipping rates around the Thanksgiving holiday nationally, starting as early as the week before the holiday, will be a concern.
Weather
We are coming to the end of hurricane season and there are no named storms at the time of writing.
Peak Season
Due to a large front loading or reshipping of imports to avoid the East Coast port strike, which ended up only lasting a few days, the number of peak shipping season imports will have minimal impact on the truckload market as a whole. For reference the next date to watch would be January 2025 which is the next negotiation deadline, which is centered around the automation aspect of future work at the port. We don’t anticipate any significant disruption due to this event even if they don’t agree. However, we will continue to monitor the situation and address any disruptions should they arise.
