#United States #Atlanta #AFS Logistics #TD Cowen #Freight Index

Overview of the Freight Index

AFS Logistics and TD Cowen recently released the Q1 2025 Freight Index, revealing a persistent lack of demand in freight markets. This report provides insight into the dynamics affecting truckload, less-than-truckload (LTL), and parcel sectors, highlighting the ongoing challenges within the industry.

Current Economic Landscape

According to Andy Dyer, CEO of AFS, the present economic outlook shows some positive indicators for freight carriers. However, the forces that influenced freight markets throughout 2024 are expected to persist into the coming quarter. Dyer emphasizes that without a significant demand-side surge, the freight market's stagnation is likely to continue, especially as more carriers exit the market.

Truckload Market Performance

In the truckload segment, demand has shown little movement, although there are some signs of improvement. Spot rates have begun to rise, and tender rejection rates indicate that carriers are becoming more selective regarding freight loads they agree to transport. Yet, this positive trend has yet to translate into a recovery for contract rates. Overcapacity continues to weigh on the market, causing truckload linehaul costs to remain elevated. As of Q1 2025, the projected rate per mile index is expected to hold steady, causing concerns among carriers about sustained profitability. The cost per shipment increased by 11.6% compared to pre-pandemic levels, but this is still below expectations given the rising operational costs.

Parcel Rates Under Pressure

In the parcel segment, carriers have employed creative pricing strategies to navigate low demand. Recent adjustments, particularly a 'blanket' demand surcharge implemented during the peak season, have led to a 16.4% increase in average accessorial charges per package in Q4 2024 compared to Q3. Despite these tactics, the express parcel market remains competitive, with the average package rate index dropping slightly year-over-year. Industry leaders like UPS have adjusted their fuel surcharge mechanisms, indicating a strategic response to fluctuating diesel prices. However, the outlook for Q1 2025 suggests that sustained discounting practices and competitive pressures may still hinder long-term rate improvement.

LTL Market Trends

Officials have noted that the LTL pricing landscape has remained strong since Q3 2023. The bankruptcy of Yellow Freight prompted significant changes that have contributed to higher rates. However, industry analysis reveals potential cracks in pricing discipline among carriers. A recent decline in fuel surcharges and a quarterly decrease in average costs illustrate a softening in LTL pricing strength. Although projections indicate a continued increase in the rate per pound index, the recent trend highlights the impact of competitive pricing strategies and the potential for a tougher environment for carriers moving forward.

Conclusion

In conclusion, the Q1 2025 TD Cowen/AFS Freight Index illustrates a freight market characterized by stagnant demand across various segments. The continued overcapacity, evolving pricing strategies, and the impact of economic factors suggest that carriers will need to navigate significant challenges to achieve growth and profitability. As the year progresses, industry participants will be closely watching for shifts in demand and pricing dynamics that could redefine the competitive landscape.

For interested stakeholders, the insights provided by the TD Cowen/AFS Freight Index serve as a critical tool in understanding the prevalent market trends and anticipated future developments.