The Freight Market Downturn: A Year in Review and a Look Ahead

The Freight Market Downturn: A Year in Review and a Look Ahead

The freight market is one of the most volatile markets on the planet. Hot markets can turn ice cold in a flash, especially when external factors such as the pandemic, trade wars, and supply chain disruptions affect the balance of supply and demand.

In March 2022, FreightWaves, the leading provider of freight market analytics and price reporting, published an article titled “Why I believe a freight recession is imminent”. The article was based on analysis from SONAR, FreightWaves’ high-frequency freight data and price reporting platform. SONAR is the market’s leading freight market analytics and price reporting system.

The article predicted that the U.S. trucking market was headed for a significant downturn due to excess capacity, easing demand, and rising costs. The article was met with skepticism and criticism from some industry players who believed that the downturn was only a spot market phenomenon that would not affect the contract market.

However, hindsight is 20/20, and now the debate over the freight market downturn is a thing of the past. The freight recession has come, and carriers, regardless of whether they operate in the contract or spot markets, are having to contend with it.

Executives of both carriers and brokers who have spoken with FreightWaves have said that the current freight market is among the most challenging of their careers and this is supported by the same SONAR data that was among the first to signal a sharp downturn.

As we enter the second quarter of 2023, it appears that the freight market may be worse than the freight recession of 2019, which was called a “trucking bloodbath” as many carriers went bankrupt due to low rates and high costs.

According to SONAR data, tender rejections are on the verge of dropping below 3% (now 3.05%), which means that carriers are accepting almost every load they are offered at low rates. This indicates that there is way too much capacity in the market and not enough demand to fill it.

So when will the market turn around? That is the million-dollar question that every freight stakeholder wants to know. Unfortunately, there is no easy answer to that question, as there are many factors that influence the freight market cycle.

Some of these factors include:

  • The state of the economy and consumer spending
  • The level of inventory and restocking activity
  • The availability and cost of drivers and equipment
  • The impact of regulations and environmental policies
  • The effect of weather and seasonal patterns
  • The influence of technology and innovation

All these factors interact with each other in complex ways that make forecasting the freight market a challenging task. However, SONAR can help provide some insights into the current and future trends of the freight market by tracking various indicators such as:

  • Outbound tender volume index (OTVI), which measures the demand for truckload capacity
  • Outbound tender reject index (OTRI), which measures the willingness of carriers to accept contracted loads
  • Truckload spot rate index (TSPOT), which measures the average rate per mile paid by brokers and shippers to carriers in the spot market
  • Headhaul index (HAUL), which measures the balance between outbound and inbound loads in a market
  • Market volatility index (VOLIT), which measures how much rates fluctuate in a market

By analyzing these indicators, SONAR can help identify which markets are hot or cold, which lanes are profitable or unprofitable, which regions are experiencing capacity tightness or looseness, and which segments are growing or shrinking.

SONAR can also help compare the current freight market conditions with historical data and benchmarks to provide context and perspective on how the market has changed over time.

By using SONAR data and analysis, freight stakeholders can make more informed decisions about their operations, strategies, pricing, and planning. SONAR can also help them anticipate potential opportunities and risks in the freight market and prepare accordingly.

At Raging Wolf Solutions, we understand how important it is to stay on top of the freight market trends and dynamics. We are a full service logistics solutions provider, offering freight coordination and transportation services across the continental United States and Canada. We leverage our expansive network of carriers and industry knowledge to bring our clients unparalleled communication and service — from pickup to delivery.

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