Large truckload carriers have been cutting capacity as they seek to balance supply and demand. Despite their efforts, the equilibrium remains elusive as demand stagnates. This reduction in capacity has been reflected in contractual truckload rate renewals, with shippers maintaining pricing power. Dry van replacement rates are still coming in lower than they were a year ago, despite carriers’ attempts to stabilize rates.
However, trucking executives are beginning to express cautious optimism about the future. While none are ready to declare a turning point, there are signs of improvement in the latter half of 2024 and into 2025. Some companies have reported stable one-way truckload demand and gains in productivity, which are preparing them for a potential market rebound in the coming year.
The TCI group of carriers that reduced their truck counts did so at varying rates, ranging from 6% to 11% year-over-year in the second quarter. The sequential reductions were more modest, between 1% and 4%. Only one carrier in the group expanded its fleet, adding over 100 tractors in the past year and reporting an increase in consolidated freight revenue.
Despite the fleet expansion by one carrier, the overall contract truckload market remains sluggish, with expectations of little change in the near term. The industry has also seen a significant exit of small truckload carriers, with nearly 32,500 carriers leaving the business between December 2022 and June 2024. This has shortened the “long tail” of small carriers, although the number of carriers with operating authority remains higher than pre-pandemic levels.
The U.S. trucking industry is showing early signs of recovery after enduring one of the most severe downturns in its history. Demand for shipments rose by an average of 9% year-over-year in the second quarter of 2024, and tender rejections, an indicator of carriers’ willingness to accept loads, also increased slightly. These trends suggest that truckload capacity is slowly beginning to tighten.
The trucking industry has faced significant challenges since the pandemic-induced boom in demand, followed by a “freight recession” in 2022. Inflationary pressures led to a decline in consumer spending, reducing cargo volumes and rates. The surplus of trucks from the pandemic boom has created a capacity overhang that continues to affect companies. Many of the industry’s largest firms have missed earnings expectations, citing underutilization of assets and flat pricing as key factors.
Looking ahead, industry analysts predict that as consumer demand continues to rise, the trucking sector could see rate gains by 2025, especially if interest rates decrease. However, structural issues, such as rising costs and increased competition, persist. Insurance and maintenance costs have surged, particularly for small-to-mid-sized fleet owners, due to high interest rates, new technology installations, and an increase in truck-related accidents.
Despite these rising costs, many smaller carriers have survived the tough market conditions thanks to cash reserves accumulated during the pandemic’s freight surge. The smallest carriers, those with fewer than five trucks, make up a significant portion of the market, and their growth has been driven by access to commercial driving licenses and technology that enables drivers to independently take on freight loads.
This “uberization” of freight loads has kept the number of carriers high, spreading out freight volumes over a larger number of companies and intensifying price competition. Larger carriers have been reluctant to cut capacity, anticipating a market recovery, while smaller firms continue to exit the market. As supply reduces and demand accelerates, industry forecasters expect rate improvements to be on the horizon, signaling a potential end to the prolonged downturn.
