Cass Report: Shipping costs dip but truckers face quiet start this busy season

This year’s busy season for trucking had a quiet start, as per the Cass Freight Index report published on October 18. On the bright side, shippers can expect to enjoy lower rates as the holidays roll in.

This isn’t great news for the truckers transporting these goods though.

Cass noted a small growth of 1.7% in available shipments in September, compared to August. However, compared to September 2022, there was a decline of 6.3%. When it comes to spending, shippers saved a bit, with a slight drop of 0.2% in September from August, but a notable 25.4% drop from September 2022, reflecting a significant dip in freight rates.

Tim Denoyer from ACT Research, who pens the report for Cass, mentioned that both the shipment and truckload linehaul indexes are showing less decline year over year, hinting at a flattening freight cycle. Although it’s expected that the cycle will pick up once capacity tightens, the early signs from 2024 equipment production suggest a delay in that shift.

A contributing factor is the growing number of private trucking fleets. During 2021, when rates hit record highs, some manufacturers expanded their private fleets to shield themselves from the soaring freight market. This expansion carried on as the ordered trucks were delivered even as rates fell.

Manufacturers moving their own goods means fewer loads for carriers. Some private fleets, based on their authority, pick up return loads from the market, leaving even fewer available loads for carriers.

Denoyer acknowledged that despite the U.S. economy bouncing back in the latter half of 2023, the growth of private fleets has hindered a potential improvement in the freight cycle. Yet, the economy remains strong.

Sadly, this economic strength hasn’t trickled down to the trucking sector as rates stayed flat in September due to insufficient loads to keep all trucks busy. Truck production is still robust, with over 22,000 trucks delivered in the U.S. in September, marking the eighth straight month of sales surpassing 20,000.

Despite a strong economy, freight levels haven’t fully recovered. As government stimulus funds dried up post-COVID-19, consumer spending slowed, prompting retailers and manufacturers to reduce their inventory levels.

On the DAT Freight and Analytics Trendlines page, the Loads per Truck figures give a glimpse into this scenario. Although the loads on the board aren’t always carried by the trucks listed there, comparing the number of available loads to trucks provides insight into the industry’s supply-demand balance. A drop in load numbers or a rise in truck numbers leads to rate cuts due to increased competition for available freight.

DAT reported a small drop of 1.7% in the van load to truck ratio from August, and a 21.3% drop from September 2022. In September, there were 2.78 loads for every truck posted on its board, a drop from 3.54 a year ago, and 6.32 in September 2021 when rates were better.

Van spot rates in September averaged $2.11 per mile, slightly up from August. On the other hand, average van contract rates climbed to $2.58 per mile.

The situation for temperature-controlled (reefer) ratios was slightly better at 3.43 loads per posted truck, though that too was down from 6.33 in September 2022 and 13.5 in September 2021. National average reefer spot rates edged up by two cents per mile to $2.52 from August rates, while contract rates went up for the third straight month to an average of $3.00 per mile.

The flatbed segment seemed to fare better, with 6.94 loads for each truck posted, although this was also down from 13.3 in September 2022 and a high of 47.9 in September 2021. National average flatbed spot rates broke their five-month decline, inching up a penny to $2.51 per mile. However, contract rates dipped another penny to $3.12 per mile.

Recent data from the U.S. Census Bureau showed promise for the flatbed segment, with new orders for manufactured goods in August exceeding market expectations by $6.7 billion. Given that manufacturing drives around 60% of flatbed demand, this could hint at an increase in available flatbed loads soon.

The Holiday Report by Motive, gauging the number of visits by trucks with Motive tech to retail warehouses to forecast economic trends, painted a broad picture. Hamish Woodrow from Motive noted a decrease in consumer demand and excess capacity in 2023, expecting this to extend into late 2023 and early 2024, advising carriers to plan accordingly.

Motive’s release foresees the contraction in the trucking market continuing into the following year, emphasizing that operational efficiency will be crucial for carriers to fare well.

Although the economy is doing well, the excess of available trucks, with more on the way, remains a challenge. Experts believe the trucking sector is on the verge of its next upswing, but the timing remains uncertain.