Dry van is the largest segment of the truck market. It is often the primary reference for the U.S. truckload market’s performance. The market of late has displayed seasonal changes in tension, as can be seen below in the red line. Over the past several weeks, the DAT load to truck ratio has increased similarly to those of the previous 5 years due to holiday pressures but has continued to normalize back into the pre-holiday softness. Winter weather storms are inflating the LTR temporarily. Week 2 shows a LTR of 2.3:1as compared to the 5-year average of 5.1:1.
Refrigerated van LTR
The refrigerated spot market TL shows a similar pattern and softness as dry van. Similarly, winter storms are inflating the LTR temporarily. Week 2 shows a LTR ratio of 3.5:1 as compared to the 5-year average of 10.5:1.
Flatbed LTR
This year's flatbed LTR has been historically low, with very little change to that narrative. The weekly ratio has been around 5.1:1 before the holiday weeks, and recent shifts suggest a normalization back to those levels. As with the other equipment types, winter weather storms are inflating the LTR temporarily. Week 2 shows a LTR of 8.2:1 as compared to the 5-year average of 33.1:1.
Regional Truckload Capacity Trends
National averages are helpful for aggregate perspectives of the market. Trucking, however, is a very regional business. Each week displays the varying experiences of the trucking market. Shown below is week 2, January 7-13, 2024.
Some markets are in balance, while others may be over or undersupplied, and other markets may have little trade and freight. The freight experience in each market influences truckload capacity strategy and that experience will vary with annual cycles.
Sponsored research by C.H. Robinson, with MIT's Center for Transportation and Logistics, has shown that there are four primary market segments: 'balanced' trade corridors, 'headhaul' corridors, 'backhaul' corridors, and 'sparse' corridors. Shipper freight attributes combined with the market segment capabilities shape capacity strategiesfrom committed to spot market. Connect with your C.H. Robinson representative to learn more about our Procure IQTM experience and our research insights that can help develop a more capable truckload strategy.
Dry van DAT market conditions index
Dry van displays a low level of tension across the United States, as depicted by blue colored regions. Yellow colored regions display relative balance, and regions with warmer colors represent markets with some tension for the week, most reflective of the winter storm.
Refrigerated van DAT market conditions index
Refrigerated trucking displays a similarly low level of tension as dry van, as depicted by blue colored regions. Yellow colored regions display relative balance, and regions with warmer colors represent markets with some tension for the week.
Flatbed DAT market conditions index
Today’s flatbed spot market LTR continues to show prolonged regional tension from Houston to Georgia, but broadly the flatbed market offers plentiful capacity for spot and contract services nationwide.
Contract Truckload Environment
Contract trucking strategies and agreements are characterized by freight and lanes with reasonably predictable demand patterns, whereas spot truckload services are typically utilized for lanes with low volume or irregular demand patterns or poor economic trade corridors. Transportation budgets are shaped by modeling the plannable and unplannable freight baskets in a shipper's portfolio, as well as accounting for some level of under performance in the strategy.
Most (75%–85%) of the U.S. for-hire truck market is moved through commitments most often managed via hierarchical route guides and dedicated truckloads. Today's market offers shippers the opportunity to place lanes with less predictable demand patterns into contract awarded route guides, moving closer to or at the 85% of freight in contract.
The contractual landscape has remained relatively unchanged since last month. Q4 and Q1 are when the majority of RFP activity happens, as shippers are preparing for the new year. During this time, it is important that shippers segment their freight. Freight characteristics, attributes, and geographies make lanes very different from each other and thus a strategic, data-driven approach is essential to determine which lanes should go out to bid in the RFP versus which are better off in the spot market. Talk to your C.H. Robinson account team about how they can help you utilize this segmentation logic to make the best decisions for your procurement process and avoid costly tender rejections that will inevitably move in the spot market.
Route guide performance
The majority of shippers' freight portfolio is managed through contracted capacity and pricing arrangements. These truckload agreements are most often managed as committed pricing for six or 12 months at defined load volume awards. Most successful executions of these agreements are in transportation management systems (TMS) where loads are tendered to transportation providers. Those tenders are accepted or rejected. Two key metrics are used to discern the success of the truckload award plan. First tender acceptance (FTA) is the percentage of tenders awarded to transportation providers that are accepted. Route Guide Depth (RGD) is an indicator of how the back-up transportation provider strategy works if the awarded provider rejects the tender. A robust trucking budget should plan for less than 100% tender acceptance due to the reality of forecasting by the shipper and capacity communities. In today's market, that variance to performance is small and incremental costs for back up strategies have lower penalties than in tight years like 2021 and 2018.
The following insights are derived from TMC, a division of C.H. Robinson, which offers a large portfolio of customers across diverse industries throughout the United States. These insights are from the week of January 3-13, and also reflect on RGD from the month of December 2023.
RGD by U.S. region
The regional view of route guide performance displays a pattern of high performance in all regions. The December North America RGD average of 1.19 (1 would be perfect performance and 2 would be very poor performance) is the lowest/best RGD for the month of December in the last six years. The North American average RGD has been consistent for some months, hovering near 1.15, with December's 1.19 reflecting holiday seasonal trends increasing 3% m/m but improving 5% y/y.
Week 2 posts a decreasing (improving) national average RGD of 1.17. All regions of the USA experienced similar route guide performance. This view of contract truckload route guides performing exceptionally well is yet another evidentiary point that the truckload market continues its pattern of oversupply.
Overall, route guides are performing very well, with primary service providers accepting loads at pre-pandemic levels, and the first backup provider accepting rejected tenders most of the time.
The chart above from TMC, a division of C.H. Robinson, reflects weekly RGD regionally across North America through the week of January 7-13.
December FTA for North America decreased from 91% to 90% m/m
FTA of 90% in December 2023 was better than the December 2022 posting of 81%, reinforcing that today's market continues to be oversupplied.
December RGD across distance bands
Today’s market is flush with capacity. Load tenders from hierarchical route guides are typically accepted by the primary awarded supplier. When rejected, they tend to be unattractive to carriers for reasons such as unpredictable demand, short lead time, or known locations with high dwell event history.
A stable RGD performance for each of the three shipment distance bands continues. Route guide depth is largely around 1.2 depending on the distance band, with short haul doing the best and medium distance loads showing the most first tender rejection and deepest route guide performance. That said, even the mid and long-haul segments are performing close to the short haul distance band.
December distance band performance (“improved” means better route guide performance and “declined” refers to more backup carrier use):
- Short haul (less than 400 miles) posted a 3% decline in performance from November but improved 5% y/y
- Middle distance (400–600 miles) posted a 2% decline in performance from November but improved 5% y/y. At 1.22 this is the lowest RGD for the month of December in the last six years
- Long distance (over 600 miles) RGD performance declined 4% from November but improved 5% y/y. At 1.2 it is the lowest/best RGD performance for the month of November in the past six years
U.S. spot market dry and refrigerated truckload rate per mile insights
Our 2024 dry van linehaul forecast remains unchanged, at 3% y/y growth. Most of the first half of the year we expect to see costs return back to the low levels experienced in the back half of 2023, excluding the last couple weeks of the year, which was inflated due to expected holiday constraints. Winter weather may factor into increased costs regionally, but increases will likely be temporary. We don't expect the market to see lasting increases until closer to the back half of the year, after more carrier supply has exited.
We are estimating the average 2023 linehaul carrier breakeven at $1.65/mile. This breakeven estimate has proven less useful in this down-cycle due to many of the dynamics we have noted in the past. Primarily this is due to increased cumulative profits amassed by many owner operators during the up cycle shortly after the pandemic, when spot pricing increased significantly. However, it is still important to estimate this breakeven level, even if it differs significantly for different carrier segments, as it does ultimately set the floor for how low rates can go over the medium to long term. While we do not yet know where this breakeven estimate goes in 2024, if we assume it remains flat with 2023 at $1.65/mile, this represents an almost two-fold increase in the annual rate of truckload operating cost inflation from a low 2% CAGR in the 10-year pre-pandemic period to a 4% CAGR from 2020-2024. (The breakeven estimate is a product of American Transportation Research Institute (ATRI) 2022 cost per mile operations cost and our analysis of the first three quarters of 2023 operations costs of public trucklines.)
Our 2024 refrigerated linehaul forecast similarly remains unchanged, at 2% y/y growth. We expect the pattern to follow that of the dry van forecast as well, as the dynamics accounting surrounding the temperature controlled truckload marketplace are the same as those in the dry truckload space.
Refrigerated Truckload
Winter weather and holidays may cause temporary disruptions, but capacity should remain plentiful
Seasonal tightening occurred over the holiday timeframe as expected and has started to normalize as we enter the new year. The DAT U.S. LTR finished at an approximate 3.6:1 average annually, much softer than the prior year of 7.9:1 and 12.4:1 from 2021. 2024 will likely continue to experience a similar environment to 2023 to start the year and won't see much change until the second half of the year. Q1 will likely continue to experience seasonal trends as capacity softens and rates bottom out. Regional exceptions will occur especially within areas battered by winter weather storms, although these constraints will likely be temporary. Towards the end of January and into February, outbound FL will see a surge in demand as flowers begin to ship in high quantities and within a scheduled timeframe in preparation for Valentine's Day. In order to best navigate the volatility in the regional markets caused by extreme weather and holiday events, work with your C.H. Robinson team to stay informed on where these pressures exist and how to best schedule freight to capitalize on the best price and service.
Flatbed Truckload
Markets remain soft and experience a seasonal geographic shift of supply
All of trucking's service segments have regional variance in capacity and pricing, as displayed earlier in this report through the spot market maps from DAT. Today's flatbed market is displaying balance between loads and trucks in most regions of the USA, but as demand increases out of the mid-South, capacity is beginning to migrate there.
- Projections on the Fed cutting rates in 2024 are leading to more optimistic volume projections, trending closer to flat y/y
- Greenfield and Brownfield capital investments that are in motion are likely to continue, industrial demand remains a positive in the space
- Residential construction will likely be softer the next couple months but as interest rates drop, that market will experience volatility
- Flatbed rates seem to be more sustainable. We're now closer to 5-year averages than previous months/quarters. There was some volatility around the holidays due to supply and weather, but rates are stabilizing
Winter weather considerations
- Weather becomes a significant issue in the flatbed market this time of year. Weather can affect driving conditions for all modes, but load securement and protection for flatbed can impact capacity.
- Carriers will typically start to move south or west as the cold weather moves in, to minimize tarping and reduce the risk of exposure when securing loads
- Properly securing loads can take additional time to thaw dunnage or tarps, moving straps on rails
- There is more risk of slip and fall and driver injury while securing or climbing on top of loads to tarp/strap
- There is increased use for tarps on typically "no tarp" loads, as well as on equipment like Conestogas and curtain side vans, which can be loaded faster and protected more easily. These are in more limited supply or often in regional carriers.
- Carriers prefer shippers with indoor loading facilities, heated waiting areas, etc.
- Most permitted loads (over dimensional/heavy haul) can only move from sunrise to sunset, so these loads travel fewer hours per day than in the summer months due to the shorter days
Collaborate with your C.H. Robinson team and talk about the proactive approach we can offer to navigate weather conditions this time of year.
Diesel Fuel Retail Pricing
Retail diesel's national USA average price per gallon has decreased from a monthly average of $4.56 in September 2023 to $3.98 in December 2023. This decrease in fuel has resulted in the U.S. Energy Information Administration (EIA) adjusting its 2024 U.S. average retail diesel price forecast within their Short-Term Energy Outlook to average "more than $3.90 per gallon". This is a decrease down from the $4.25 that they forecasted in November. As depicted in the visual below, created based on the data provided by the EIA, you can see that fuel is recently near the lowest levels of 2023. The EIA also report crude oil prices to be relatively flat in 2024.
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