The U.S. truckload market continues to tighten as we move into the beginning of the week. The closing spreads between contract and spot rates are narrowing, and several major trucking markets are rejecting more than 7% of outbound shipments. However, there is no significant surge towards higher rates compared to the conditions seen during the holiday retail peak season.
Los Angeles stands out as it has softened compared to the rest of the country, with outbound rejections cooling to just 4.44% while the national average remains at 7.11%. Since LA is a crucial origin for retail imports, its performance influences markets further inland. On the other hand, Dallas and Chicago are tighter than the national average, with rejection rates of 7.25% and 7.64% respectively. Despite recent weather-related spikes in tender rejections, both markets are gradually returning to normal conditions, with Chicago expected to remain tight for a longer period.
Publicly-traded trucking carriers, such as Knight-Swift, have reported mixed results reflecting the current state of the U.S. trucking market. While the less-than-truckload (LTL) segment experienced a significant revenue increase driven by higher shipments and revenue per shipment, the truckload (TL) segment faced challenges with falling volumes and rates. Knight-Swift’s strategic approach to rationalize its tractor and trailer counts aimed to improve fleet utilization, leading to a slight increase in revenue per tractor despite a decline in total loaded miles.
The inventory landscape also plays a role in influencing truckload demand, with upstream facilities showing expansion while downstream retailers report lower inventory levels. This disparity suggests potential opportunities for increased freight movement in early 2025 as upstream firms replenish their inventories and downstream retailers ramp up stocks to meet consumer demand.
Despite challenges, the truckload market is showing signs of transition with a reduction in excess capacity and the first signs of long-term contract rate inflation since 2022. The spread between contract and spot rates is narrowing, indicating a potential increase in spot rates as carriers find the spot market more advantageous. Knight-Swift is positioning itself for favorable rate increases and is seeking mid-single-digit rate hikes to align with market trends.
In conclusion, the U.S. trucking market presents a complex yet promising scenario with challenges in the TL segment, potential demand surges in early 2025, and an upward trajectory for freight rates in the near term. Companies like Knight-Swift are well-positioned to leverage these trends, providing a cautiously optimistic outlook for the trucking industry in the months ahead.
