U.S. spot market forecasts
Our 2024 dry van linehaul forecast is being slightly altered from the previously stated 4% y/y to 2% y/y growth. The adjustment here is reflective of the slightly lower ‘floor’ during March and April. Our view of the future beyond that remains unchanged because of the factors mentioned above. Our initial 2024 forecast anticipated that the spot market would return to the bottom for pricing after the 2023 holidays, but that drop was delayed by nationwide winter storms. Showing just how much supply is still in the market, prices then rapidly returned to the bottom in February, where we remain. We expect rates to remain fairly close to this level until produce season starts to drive them upwards in May. As mentioned in the story above, we expect the excess carrier supply to have exited the market as we see carrier counts return to be in line with historically normal levels in the third quarter which, coupled with modest freight demand increases, we believe will result in increased rates
We are estimating the average 2023 linehaul carrier break-even at $1.65/mile. This estimate of average cost for carrier operations has proven less useful in this down-cycle due to many of the dynamics that we have noted in the past, primarily the increased cumulative profits amassed by many owner operators during the up-cycle shortly after the pandemic when spot pricing increased significantly. However, it is still important to estimate this break-even level, even if it differs significantly for different carrier segments, as it does ultimately set the floor for how low rates can go over the medium- to long-term. Essentially, with the market operating below cost for such an extended amount of time, causing many carriers to go out of business or forced to downsize, it demonstrates that pricing is unsustainable at current levels.
While we do not yet know where this break-even estimate goes in 2024, if we assume it remains flat with 2023 at $1.65/mile, this represents an almost two-fold increase in the annual rate of truckload operating cost inflation from a low 2% CAGR in the 10-year pre-pandemic period to a 4% CAGR from 2020-2024. (The break-even estimate is a product of American Transportation Research Institute (ATRI) 2022 cost-per-mile operations cost and our analysis of 2023 operations costs of public truck lines.)
Our 2024 refrigerated linehaul forecast similarly remains relatively unchanged for the back half of the year, although slightly adjusted downward for certain peaks, at 1% y/y growth. We expect the pattern to follow that of the dry van forecast as well, as the dynamics surrounding the temperature-controlled truckload marketplace are the same as those in the dry truckload space.
Contract Truckload Environment
The contractual landscape has remained relatively unchanged since last month. The contract environment tends to follow the spot environment, so given our forecast above for spot pricing, we don’t see too much change within this space holistically for several months. Although one thing to keep in mind is the duration of said contracts, as longer-term commitments may see different pricing than shorter-term commitments.
The following insights are derived from TMC, a division of C.H. Robinson, a Transportation Management Systems (TMS) which offers a large portfolio of customers across diverse industries throughout the United States.
Contractual Route Guide Performance
Route Guide Depth (RGD) is an indicator of how the back-up transportation provider strategy works if the awarded provider rejects the tender. As displayed in the following chart, the RGD has remained fairly flat for approximately a year now. For long hauls more than 600 miles, the RGD in February 2024 was 1.22 (1 would be perfect performance and 2 would be very poor) which is slightly worse (2%) than the prior month of January at 1.20 but slightly better (3%) than February 2023’s RGD.
Overall, route guides are performing very well, with primary service providers accepting loads at pre-pandemic levels, and the first backup provider accepting rejected tenders most of the time. Yet, even in the softest of markets the RGD is not a perfect 1.0 but is rather hovering around the 1.20 mark. This historic chart demonstrates that even at the bottom of the market, there is still freight not being accepted, which our academic research shows is likely due to freight procurement processes.
As we anticipate tightening market conditions in the second half of the year, consider talking to your C.H. Robinson account team today about how they can help you properly segment your freight to make the best procurement decisions based on your freight characteristics. When the market tightens and tender rejections increase, having a pre-determined plan in place will help you avoid costly premiums on freight that will inevitably move in the spot market.
Voice of the carrier from C.H. Robinson
C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are aggregated insights from conversations with carriers of all sizes to offer perspective into their top concerns over the past month.
Market insights
- Bid activity remains high, which is seasonally expected, with carriers focusing on culling lanes that aren’t suitable in their network or don’t improve yield
- Despite the high bid activity, carriers are pricing business at flat to slightly increased rates
Equipment
- Trailer costs have dropped significantly due to soft demand as trailer orders have decreased approximately 40% y/y, leaving trailer builds back at pandemic level lows
- New truck costs are still high, especially in this portion of the market cycle
Drivers
- With the exception of certain nuanced circ*mstances, almost no carriers have immediate plans to add driver headcount
- Driver turnover remains an ongoing issue
- Driver application counts remain healthy, but finding quality drivers to backfill for natural attrition remains a challenge
A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability from our vast shipper network. This provides our carriers with more predictable volume from C.H. Robinson, and as a result, they are interested in and able to offer consistent capacity and market pricing with high performance.
Engage your account teams for more information on how to leverage our scale.
Refrigerated truckload
Spot market rates continued to slide through February and leveling off in early March at extreme lows. The marketplace remains muted, and where pockets of tightness appear, they are doing so in an abbreviated, but volatile manner.
East Coast – Early February was busy with a strong floral season out of the Southeast. As that demand has subsided, market conditions have continued to soften across the entirety of the East Coast. We should see markets shift towards the end of March, as pockets of produce start to kick off. South Florida produce is the kickoff for domestic produce season and is a strong indicator of what to expect from a capacity climate across the country.
Central U.S. – Weather has remained mild throughout the North Central region driving a softening in the market quicker than normal. Many “protect from freeze” shippers transitioned back to ambient strategies because of warm weather earlier than expected. The South Central has had and will continue to have capacity readily available through the next month.
West Coast – The Pacific Northwest has felt some weather disruption, but the impacts have not been lasting. Intra and long-haul California markets remain very soft, and we expect rates will remain depressed through the month of March.
Work with your C.H. Robinson team to stay informed on regionalized opportunities and how to best schedule freight to capitalize on the best price and service.
Flatbed truckload
Generally speaking, the flatbed market remains relatively soft; although we are seeing volume increases in localized geographies within the building construction materials market. These stronger construction numbers, which are outpacing other verticals/industries, has subsequently resulted in top transportation research firms increasing their forecasts for flatbed volumes and rates in 2024 y/y. In the near-term, capacity has been able to handle these localized loadings increases and since the additional volume is not nationwide yet, it has not yet added any upward pressures on costs despite this being the seasonal norm.
It's a great time to leverage CHR Flatbed capacity for projects. As the ground thaws and construction projects get back underway, there can be excessive "lumpy" demand due to installation schedules. We can help assist standing up batches of capacity quickly for short-term needs. Collaborate with your C.H. Robinson team to set yourself up for success.
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