After months of wallowing in the trough of a freight recession, truckload demand and capacity appear to be normalizing, nearshoring activity to Mexico is rapidly escalating, and less than truckload (LTL) tailwinds have arrived, according to a report from Uber Freight.
Despite those encouraging signs, shippers and carriers must be nimble as they make critical decisions to keep their supply chains moving forward through the busy holiday season and into the new year, the company said in its “Q4 Market Update and Outlook Report.”
Likewise, after hitting the bottom in April 2023, truckload demand has slowly but surely increased over the course of the year. In Q3, it rose by 1.2% and was flat year-over-year. Demand has turned positive for the first time in nine months with the truckload market likely beyond the bottom, Uber Freight said.
“Normalized capacity also seems to be within view as new entrants recede and existing carriers manage their headcount. We anticipate low rates and rising operating costs will put more pressure on carriers, accelerating the rate of supply correction,” Uber Freight said in a blog post.
Those reductions in trucking industry headcount may come as Uber Freight saw truckload employment increase by 13,400 in September, likely as a result of Yellow’s drivers flooding the trucking market after the company closed down in August. Although trucking employment is flattening out, large fleets may not continue to absorb excess capacity from failing carriers and owner-operators in the coming months. In fact, Uber Freight expects long-distance truckload employment to drop 3% to 5% year-over-year based on lower carrier revenues and profit margins.
In addition to absorbing Yellow Corp.’s former drivers, existing carriers will also soon find new homes for the failed company’s 12,000 tractors and 35,000 trailers, Uber Freight said.
Finally, the freight market has also benefitted from Yellow’s demise by winning its former customers. That helped individual carriers to show signs of tonnage improvement in September, since the LTL market had the excess capacity to absorb Yellow’s volume with relatively few disruptions. However, overall LTL tonnage and shipment count is expected to remain at reduced overall levels through the end of the year and into 2024.
In response to those conditions, Uber Freight advised that shippers should take advantage of abundant capacity to secure low rates ahead of continued market volatility, but remain cautious towards overly aggressive rates, which could jeopardize their service in case the market tightens next year. With an expected 3-6% contractual increase heading into 2024, shippers should continue to work with their logistics partners to ensure long-term success. Specific strategies shippers can deploy to make the most of their LTL shipping include: unlocking network and carrier collaboration, origin optimization, timely freight payment, pricing strategy, and packaging improvements.