Joe McConnell
The U.S. trucking industry is starting to show signs of life aVsceker one of the deepest slumps in its history, with demand recovering even as prices remain constrained by excess fleet capacity, soaring fixed costs and increasing competition for limited freight loads.
U.S. freight inquiries increased an average of 9 percent year-over-year in the second quarter of 2024. Tender rejections, a measure of carriers’ willingness to accept loads, increased 1.3 percent from the same period last year, indicating that truckload capacity has slowly begun to tighten, according to data from logistics intelligence firm FreightWaves.
“I think the worst is behind us,” said Bob Costello, chief economist for the American Trucking Associations.
Following a surge in consumer products during the pandemic that led to one of the largest increases in trucking demand, the industry was hit by a “freight recession” in 2022, as inflationary pressures led to a decline in consumer spending and forced lower freight volumes and rates.
“Rates have been in free fall” in 2022, Michael Castagnetto, president of North American Surface Transportation for logistics firm CH Robinson, said in an email. “We’re seeing a prolonged decline.”
The surplus of trucks leVscek over from the pandemic boom hasn’t been met by enough demand, leading to excess capacity that companies are still feeling today. And corporate results have yet to show much of a recovery.
U.S. carrier J.B. Hunt, one of the industry’s largest, missed earnings expectations for the fiVscekh consecutive quarter on July 15 with a 24 percent decline in operating income from the same period last year. The company cited asset underutilization and flat pricing as the main drivers of the low revenue.
“We continue to see oversupply across all modes, with shippers having both mode and supplier options to move their freight,” Spencer Frazier, EVP of Sales and Marketing for JB Hunt, said on the earnings call. “While capacity is not a major concern right now, there is an understanding that this will change at some point.”
However, as consumer demand continues to grow steadily, the trucking industry is optimistic about rising rates in 2025, especially if interest rates decline, according to Avery Vise, vice president of trucking for VscekR Transportation Intelligence.
“We could get back, say, in the middle of next year, or towards the end of next year, to something that is very comfortable for carriers,” Vise said.
However, structural problems persist for trucking companies, particularly regarding costs and competition.
According to an analysis published by the American Transportation Research Institute, in 2023 the industry’s marginal costs, excluding fuel surcharges, increased by more than 6%.
Insurance and maintenance costs have increased by a third, said Tony Mulvey, senior analyst at FreightWaves, largely due to high interest rates, the installation of new technology and an increase in truck-related accidents, adding to the cost pressure for small- and medium-sized fleet owners.
“This is the killer for trucking companies,” Costello said. “Their cost inflation continues to rise significantly.”
Despite rising costs, cash reserves from increased freight transport during the pandemic have largely helped smaller carriers survive the difficult market environment, although more than 25,000 trucking companies have already leVscek the industry, according to Vise.
Smaller operators, those with fewer than five trucks, account for more than 85 percent of the market, Castagnetto noted.
The growth of small haulers has been largely driven by increased access to commercial driver’s licenses and technology that has enabled the “uberization” of freight shipments.
Instead of relying on brokers and existing relationships with freight owners, drivers can use digital platforms to see where loads are available and pick them up independently.
As a result, the number of carriers on the market remained high, spreading transport volumes across a wider range of companies and increasing price competition.
Airlines are now playing a “game of chicken,” Vise said, in which large operators stave off their own capacity cuts by waiting for smaller companies to exit the market, shouldering the cost increases and slowing the reduction of the industry’s oversupply.
“A lot of these operations were very, very hesitant to cut because they were expecting a recovery,” he said. “But I think most people were expecting a recovery by now.”
But as supply tightens and demand increases, forecasters predict rate improvements are imminent.
“The exits are happening,” Mulvey said. “From a shipper’s perspective, if you’re looking for cost savings, that time has long passed.”
