2024 Freight Rate Forecast: Predicting the Unpredictable
Prognosticators expected 2023 to be bad, and the freight recession has been blamed for cutting deep into the coffers of carriers and logistics providers.
The nearly century-old LTL carrier Yellow went belly up in the summer. Digital freight broker Convoy, a golden child not so long ago, went kaput in the fall. It seemed no part of the supply chain went unscathed, with even warehousing jobs, which multiplied like rabbits during the pandemic, going by the wayside throughout 2023.
Imagine if there was a Magic 8 Ball for both carriers and shippers. Carriers could ask if freight rates will go up in 2024 and hope for an “Outlook good” response. Shippers could ask if capacity will remain loose this year and cross their fingers that they don’t see “My sources say no” when they turn over the ball.
Without a Magic 8 Ball or an office filled with pricey pricing analysts, trusted partners skilled in weathering the ebbs and flow of freight are essential to help providers be ready for the next uptick in rates and tightness in capacity. Both will come, as evidenced by past cycles; it’s just a matter of when.
Five factors contributed to the 2023 freight recession, according to MoreThanShipping.com.
Yes, 2023 was a bad year for the freight industry, but was it truly bloodbath ugly?
Some armchair analysts have asserted that management and the Teamsters were as much to blame for Yellow’s demise as the economy.
FTR Transportation Intelligence’s Vise suggested to GeekWire that Convoy’s business model may have contributed to its downfall. He pointed out that with truck capacity easy to find, shippers got favorable freight rates with large carriers instead of the owner-operators and smaller fleets targeted by Convoy.
DAT Freight & Analytics’ Dean Croke wrote in a mid-January market update that 2023 differed from 2019 in that we did not see “anywhere near the level of carrier bankruptcies reported despite the number of long-haul carriers exiting the market.”
Outside of Yellow, the trucking companies that went out of business in 2023 generally were smaller and/or regional, including Matheson Trucking and Meadow Lark Transport.
As in 2023, too much trucking capacity put downward pressure on spot rates in 2019, Croke explained, noting that the difference is that the 2019 freight climate caused the bankruptcies of big carriers like Falcon, Celadon, and New England Motor Freight.
Then came COVID. “What happened in the last six months of 2020 was nothing short of remarkable and set the stage for an unprecedented doubling of for-hire truckload capacity in 2021,” Croke wrote.
He pointed out that from June to December 2020, diesel costs dropped 23%, and dry van linehaul rates went up by about $1 a mile.
“All of that changed, though, when Russia invaded Ukraine on Feb. 24, 2022, sending diesel prices sky-high and global demand in the opposite direction,” Croke said.
Still, Croke contended that most long-haul carriers were “getting by” when 2023 came to a close.
“Following the massive build-up of shipper inventories in 2021 and 2022 and decreasing freight demand over the year, carriers could still break even in 2023 despite the rollercoaster ride of diesel prices,” he wrote.
Already in 2024, e-commerce powerhouse Wayfair and venerable retailer Macy’s have announced major layoffs and warehouse and store closures. Uber Freight cut 150 employees from its digital brokerage team in January.
Jason Miller, a supply chain professor at Michigan State University, posted on LinkedIn in late January that he has not seen “any signs of manufacturing activity improving over the next few months. This suggests continually muted freight volumes. I urge everyone to disregard predictions of a market turnaround, especially in the truckload sector, in late Q1 or early Q2 2024.”
DAT’s Croke is more optimistic. “If [carriers] can survive the first quarter of this year – when rates are sure to drop along with freight demand – they will thrive when the market turns, hopefully in the spring.
“One thing is for sure: fewer trucks will be available to move a higher freight volume when the freight market does turn. And that means higher freight rates and improved profit margins,” Croke wrote.
A CNBC supply chain survey conducted in the fourth quarter of 2023 showed a “slight turnaround in freight volume in the second half of 2024.”
Brian Bourke, SEKO Logistics’ global chief commercial officer, told CNBC’s Lori Ann LaRocco, “With a lot of uncertainty around consumer demand, interest rates, and the global economy, most people do not have a positive outlook on freight volumes in the first half of [2024], but we could certainly see a rebound in the second half.”
Who knows? The wallop to the world delivered by COVID shows that the unimaginable can become reality. Say the crisis in the Middle East gets even worse and the Suez Canal is closed to trade for months. Say Panama gets no rain for months, and the canal is open only to containerships capable of carrying just a few thousand twenty-foot equivalent units. Say a hundred-year storm cripples both rail and truckload operations in major freight hubs like Chicago and Atlanta for weeks.
Both shippers and carriers must find a balance to both expect the unexpected and ready themselves for the expected. But how?
As signs point to shippers continuing to have the upper hand in at least the early months of 2024, carriers must arm themselves with all the shovels they can find to dig out of the freight recession. On the other hand, shippers must find logistics and transportation providers they trust to give them the best rates and follow through with on-time, headache-free delivery.
Both shippers and carriers can weather the economic storm without a single trip to the hardware (or software) store – or hiring an entire team of pricing analysts. A.N. Webber Logistics can help clients navigate these unpredictable times.
“Pioneering excellence in logistics since 2005,” A.N. Webber has ridden the cycles of freight waves and droughts and thus can take a level-headed approach to market fluctuations. “Take the stress out of freight,” A.N. Webber advises on its website. “Partner with logistics professionals who get it.”
Getting it goes to A.N. Webber’s roots as a truckload carrier, launched in 1947 and expanded over the years to share its expertise in logistics and warehousing services. Today, A.N. Webber, headquartered in Kankakee, Illinois, operates in the 48 contiguous U.S. states as well as Canada and Mexico.
A.N. Webber’s customer list reads like a “Who’s Who” of manufacturing, retail, and transportation, with names like C.H. Robinson, Dow, Ford, Ryder, Schneider, and Sherwin-Williams.
A.N. Webber’s offerings include:
Riding the Storm Out
While predictions vary as to when the freight market will turn, it will turn. Some believe it’s already happening.
“The shift has begun!” Ken Beyer, CEO of Transportation Insight and Nolan Transportation Group, wrote on LinkedIn in mid-January. “Spot rates have finally gone inflationary for the first time since Q2 2022 and crossed over the contract rate curve on a %YoY change basis.”
He added, “Volatility is coming to the market this year, even if you don’t feel it today.”
To help weather that volatility during the economic and geopolitical storms of 2024, contact A.N. Webber Logistics.
Each solution is designed to meet your unique needs, ensuring efficient, reliable freight management no matter the size or scope of your operation.
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