The Market Report: March 2023

Despite the flat spot rates, contract negotiations will remain pressured by a significant gap between spot and contracts while supply normalizes against an uncertain backdrop of faltering demand. We may see conditions balance in 2023's first half; however this could be disrupted if there is a sudden shift in market demands.

Highlights

• Overall, demand is stable but large orders are typically shipped by leading contract carriers.
• The differential between spot and contracted van/reefer prices stands at $0.61/$0.53 per mile respectively, making downward pressure on contracted rates a given.
• Current spot prices are too low to allow carriers to make a profit, causing numerous owner-operators with major exposure to the spot market to terminate their authority.
• Trucking job numbers dropped dramatically in one month, outpacing those transitioning from owner-operator positions into company jobs.
• Manufacturing experienced its fourth successive contraction, likely leading to lower expected demand for 2023.
• Consumer spending is still strong, although services have become the main driver of growth recently.

Truckload Demand

February marked an unsteady month for the freight market, although demand levels still remained much higher when compared to pre-pandemic figures. Tenders accepted increased by 1.4%, yet overall tender volumes dropped 30%. Spot markets observed a steep 70% decrease from last year and 17% dip from January's numbers as well, suggesting seasonal constraints in the tail end of this period were alleviated or at least reduced significantly due to contractual arrangements being prioritized over spot loads.

Truckload Supply

As the freight market continues to remain in a state of relative abundance, data from last month paints an informative picture about its status. February saw stable contractual shipments as indicated by only marginal growth in Outbound Tender Reject Index (OTRI). This was accompanied by decreases noted for van and reefer tender rejections throughout the same period - indicating that cargo is being shipped properly against available capacity.

The transportation industry has seen a decrease in demand over the past month, with both Dry Van and Reefer loads declining by double-digits year-over-year. Although freight levels remain below average for this time of year, there are indications that we may yet see some tightening heading into March due to higher produce shipments - something which should not considerably disrupt shipper acceptance.

Truckload Rates

After an unexpected surge at the end of February, market rates have remained relatively steady. Van and reefer prices continue to be held back by year-over-year decreases in both spot and contracted rates with van down 27%/13%, respectively, while flatbeds experienced a month-to-month elevation coming closest to pre pandemic numbers - $2.12 for spots & $2.81 per mile on contracts. These fluctuations provide insight into our current freight economy as we move further into the year, and shows the importance of staying informed when making business decisions within today’s everchanging transportation landscape.

Truckload Capacity

The trucking industry is facing unprecedented challenges due to the pandemic, as shippers have revised their volume forecasts and awarded smaller contracts. This has resulted in carriers needing to right-size their fleets and competitive spot rates that are below operating costs per mile. To further complicate matters, more carriers than ever before are revoking their trucking authority while new Class 8 truck orders rose for the first time after five months of decline.

Truckload Volume

The future of freight demand appears to be uncertain for 2023, with continual downward revisions to volume forecasts. Manufacturing and retail have been particularly hard-hit, with new orders contracting for six straight months in manufacturing and imports hitting record lows. Retailers are bringing in less merchandise as they work to keep inventories balanced with consumer demand, and backlogs are continuing to ease.

Consumer Sentiment

Although February's inflation data showed a decline, there is more to the economic landscape than meets the eye. Recent events like Silicon Valley Bank’s failure have raised questions and concerns while consumer spending reflects signs of financial uncertainty. Interestingly, lower-income households seem emboldened by their ability to outspend those with larger incomes – but only time will tell if this trend holds up in light of current market conditions. Initial jobless claims are also remaining consistent near pre-pandemic levels; however, it remains unclear how long these confidence numbers can remain robust given today's unpredictable climate.

Sources:

FTR Intelligence, “FTR Reports and Data,” Accessed March 2023.

FreightWaves SONAR Outbound Tender Volume Index (OTVI), Laursen Labs LLC dba FreightWaves. Accessed March 2023.

FreightWaves SONAR Outbound Tender Rejection Index (OTRI), Laursen Labs LLC dba Freightwaves. Accessed March 2023.

DAT Solutions, “Trendlines | DAT - DAT Solutions North America's Largest On-Demand Freight Marketplace with Load Board & Truckload Rates | DAT Solutions," Accessed March 2023.

DAT Solutions North America’s Largest On Demand Freight Marketplace with Load Board and Truckload Rates | DAT Solutions, “Van Demand & Capacity | Trendlines," Accessed March 2023.