The trucking industry has long been sensitive to economic fluctuations, and the past couple of years have seen a great deal of pain in the industry, with the recent folding of many fleets. Following 27 months of consistent rate declines, 2024 has finally seen a slight year-on-year increase of 0.2% in trucking rates. This modest rise has led some to speculate that the worst may be over, but this small uptick signals just a potential turning point. It is not yet an indication of full recovery. The industry won’t start to feel any true relief until it experiences one full quarter of positive gains, albeit accompanied by some turbulence.
The root cause of the industry’s ongoing struggles lie within the pandemic-driven imbalance between supply and demand. When demand surged during COVID-19, over 100,000 new trucking companies entered the market to capitalize on what was seen as a “hot” market. These new entrants purchased trucks at record-high prices, believing the pandemic-driven boom would last into the foreseeable future. But all good things end, and as demand tapered off in 2022, many were left with costly assets and loans they could no longer afford to maintain against a backdrop of rapidly falling rates. As a result, the trucking industry found itself awash in excess capacity, with rates plummeting accordingly.
Freight volumes are a key indicator of the industry’s health. After a steep decline in truck tonnage during spring 2023, there was a brief period of fragile stability, only for 2024 to kick off with another sharp downward spiral. The first half of 2024 was marked by volatile swings: a 4.3% rise from January to February, almost erased by a 3.2% drop through April. Then, a 3.6% rise in May was followed by a 1.6% drop in June. Despite the volatility, each dip has become seemingly less severe. If this pattern of incrementally higher lows continues, broader stabilization seems more likely, according to the data.
Spot rates for dry van shipping have fluctuated between $2.01 and $2.20 per mile, a stark contrast to the $3.28 peak of June 2022. Contract rates, which traditionally offer more stability, have similarly declined, hovering around $2.48 to $2.73 per mile. Today, anecdotal evidence suggests that contract rates have bottomed out and are on the rise, as more carriers voice concerns to shippers that low rates will no longer be tolerated or subsidized.
This persistent softness in rates has forced thousands of carriers out of the market. From December 2022 to March 2024, the Federal Motor Carrier Safety Administration reported a 7.6% reduction in carriers and a 10.7% reduction in brokers. The bankruptcy of Yellow, a major less-than-truckload (LTL) operator, sent shockwaves through the sector in August 2023. These ripples are still being felt today, as 10,000 carriers have ceased operation in the first half of 2024 alone.
However, there are more encouraging signs of life beyond the slight 0.2% year-on-year increase in shipping costs and the higher lows in month-to-month freight volume swings. For the first time since the pandemic, the number of revoked registrations has surpassed new ones, indicating that capacity is beginning to tighten up. In addition, the expiration or default of COVID-related loans could further bring about capacity reduction, serving as a market-clearing mechanism. While this is far from a full recovery, it does suggest that the industry is starting to balance out.
Looking ahead
The Cass Truckload Linehaul Index is a measure of the movement in linehaul rates. This index includes both spot and contract freight.
Cass Information Systems Inc.
The remainder of 2024 is expected to continue to be a transitional year for the trucking sector. The general sentiment in the market is that while we may have hit rock bottom, recovery will be gradual, uneven, and nonlinear. Many analysts are eyeing fall 2024 as the earliest sign of true improvement, though more cautious predictions push meaningful recovery into spring 2025.
The Cass Truckload Linehaul Index (see chart above) indicates that we’ve reached a floor in rates, but carriers are still struggling to find their footing. Frustrated by unsustainably low rates, many carriers are still turning down low-margin freight due to rising operational costs like fuel, labor, and maintenance, which has left them unable to maintain profitability or support operations at such thin margins. Inflation, fluctuating inventory levels, and construction activity will all influence how quickly demand recovers and whether carriers can emerge from this precarious situation.
While inflation is cooling and consumer demand is slowly picking up, the sector remains highly sensitive to external factors such as geopolitical tensions and broader economic health. Until demand recovers more robustly, trucking will remain in a state of flux.
Leveraging tech to fast-track recovery
The challenges facing the trucking industry also present an opportunity to innovate and transform. Digital transformation is increasingly being seen as a lifeline for carriers looking to weather the storm, while gaining a competitive advantage. The adoption of technology across various aspects of trucking—from logistics to operations—will play a critical role in reshaping the industry’s future.
One area where technology is making a significant impact is in route optimization and digital freight matching. With excess capacity still a significant issue, digital freight platforms are helping carriers fill trucks by matching them with third-party shippers, thus minimizing deadhead miles and improving asset utilization. This technology helps level the playing field, enabling operators to compete more effectively, while keeping drivers happy and improving the bottom line.
Artificial intelligence (AI)-powered route planning and dispatch tools are also gaining significant traction. These tools leverage existing data sets and systems to analyze and suggest, in real-time, the most optimal plan in the context of a driver’s trip. These optimal plans limit judgment (and, therefore, offer less room for error, bias, and waste), miscalculations, unnecessary mileage, and fuel consumption. Through optimization and real-time dispatch, carriers can reduce empty miles and lower operating costs to achieve higher levels of performance.
Finally, transportation management systems (TMS) are essential for fleet managers, and modernization of these systems is underway. These systems provide end-to-end visibility over operations, allowing companies to monitor shipments, improve communication with shippers, and respond more dynamically to market changes. AI-driven analytics allow carriers to forecast demand more accurately and adjust their operations more proactively. These tech-driven improvements could be game changers, especially for operators struggling to compete in a turbulent market.
Shippers’ role in recovery
Shippers, too, have a role to play in the industry’s recovery. By diversifying their carrier networks and embracing technology, they can build more resilient supply chains. The pandemic exposed vulnerabilities in relying too heavily on a small pool of carriers. Now, by leveraging digital freight matching and analytics, shippers can not only find the best-fit carrier(s) but also build a robust network of backup options—safeguarding against supply chain disruptions caused by the next geopolitical or global health crisis. Savvy shippers will continue to look to carriers for improved efficiency and the reduction of cost and complexity, and technology will continue to be the enabler.
