Current market conditions have not improved enough to adjust the OOIDA Foundation’s future outlook.
In its March market update, the Foundation maintains a negative future outlook.
Key variables in determining this outlook are rising volume/demand, loose capacity, bottoming rates and high operating costs.
Though there were some positive signs in March, such as an increase in load-to-truck ratios, we’re still in a trough in regard to demand overall, the Foundation market report said.
“Basically, everything else is not looking so great for the most part,” said Andrew King, assistant director for the OOIDA Foundation. “There’s an uptick in demand, but rates keep falling. They seem to keep finding a new floor. We still have a surplus of trucks, and that is not helping anyone out there.”
Van market
Unlike the previous month, nine regions experienced increases in demand, with the largest increase in the California region.
Both spot rates and contract rates fell.
Inventory-to-sales ratios decreased, while monthly sales increased. Demand has not increased, which is why the current freight downcycle is continuing despite inventory rightsizing.
Household appliances have performed well since the start of 2024.
Flatbed market
Load-to-truck increased 35% month-over-month, with 12 of 16 regions reporting an increase.
DAT’s ratecast predicts that spot rates excluding fuel will continue to perform well.
Total construction spending, highways and streets spending and non-residential spending decreased for the second consecutive month.
Housing starts plummeted in March.
Retailers continued to struggle with high inventory levels. This indicates a significant headwind for future freight demand, as demand overall remained low.
Reefer market
Conditions were more favorable for carriers operating in the Upper Mountain, South Central and California regions.
The spread between spot and contract grew but was 9% better compared to a year earlier.
According to the U.S. Department of Agriculture, carriers in the Pacific Northwest region experienced the greatest decrease in pay per mile month-over-month.
Truck volumes are following the typical seasonal pattern.
Reefer truck capacity loosened even further in March, as rates fell and volumes increased.
Trucking market
The Transportation Service Index increased enough to essentially offset last month’s decline.
According to the Cass Shipment Index, “The freight cycle is certainly stabilizing, with rates below sustainable levels in many cases and little room for further savings.”
Employment numbers increased to 1.56 million following adjustments.
The industry has experienced overcapacity since the fourth quarter of 2022. Though it’s not the primary cause for low rates, it’s not helping matters.
Fuel prices are down month-over-month and have decreased year-over-year for 13 consecutive months.
Preliminary used-truck prices continued their downward trend in March.
Contrary to several articles out there, don’t expect the new freight cycle to start materializing until at least the second half of 2024, the Foundation update said.
“What you need is demand to go up, because that is the biggest factor,” King said. “I’m not disagreeing that we need some capacity to leave, but it’s not the cause that we’re looking for that will turn the market. No market has ever shifted simply because capacity increased or decreased.” LL
Read the full OOIDA Foundation market update here.
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