24 August 2023
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The summer freight market got off to a hot start, which is only fitting considering July was widely reported as the hottest month ever recorded on planet Earth. With market disruptions involving extreme weather and Amazon soon to enforce new environmental standards, climate concerns have taken center stage in the freight market.
Current state of the freight market.
July was one of the more constructive months in a while from a macro standpoint – with slight improvement in the Cass Shipments and ATA truckload demand indicators compared to prior months and what’s typically been a mixed bag of contradictory signals coming in decidedly less mixed and mostly positive.
So while hardly confirmation that we can completely call off the 2024 recession watch just yet, there are plenty of reasons to remain optimistic with regard to both the path of the economy and the US freight market.
Spot rates.
Even after some 4th of July volatility, Q3 spot rates sit roughly -1.2% lower than in Q2 – but expect them to trend higher in the coming months due to rising diesel costs, carrier exits, seasonality, and a major storm or two.
By the end of the year, spot rates will likely run 10-15% higher than they are now and break year-over-year (Y/Y) inflationary for the first time since Q1 2022.
Contract rates.
Contracted rates closed Q2 down roughly 14% Y/Y – nearly 4% lower than forecasted. Based on past cycles, we could easily see either:
- rates drop another 1-2% before hitting bottom and rising for the remainder of the year
- rates journey back to equilibrium and into the next Y/Y inflationary leg by mid-2024
But with the first glimpse of Q3 numbers looking as forecasted (July Cass Linehaul Index coming in at -11.0% Y/Y), it’s looking like the latter is more probable; however, we’ll have to see how the rest of the quarter goes to be sure.
Insights for shippers.
Now, while they’re nearing their lowest cost, is an ideal time to secure contract rates. You can then fill in any gaps with what are still relatively low spot rates.
With both linehaul rates expected to rise throughout 2024 and diesel costs up sharply as well in recent weeks, it would be wise to stay informed on market insights, pay extra close attention to your budget, and look for ways to lower your costs.
Insights for carriers.
After an extended period of low rates, things are finally shifting in your favor. But we urge caution in committing to longer-term contracts unless they’re priced right over the term you are committing to. Although both rates are still low, it’ll likely be far more lucrative to utilize spot rates now and wait for contract rates to rise. Since they’re currently at, or very close to, rock bottom, they can only go up from here.
LTL market disruptions.
The threat of significant disruption seems to be becoming the new normal in logistics, particularly for the less-than-truckload (LTL) shipping market. With tumultuous markets, labor disputes, and climate-driven disruptions, shippers and carriers have been facing near-continuous uncertainty – adding up to a less-than-reliable freight market.
Yellow bankruptcy.
Illustrating that even established carriers are not immune to rapid market shifts, the bankruptcy of Yellow, one of the nation’s largest LTL carriers, has shippers worried about lost cargo, capacity constraints, and higher prices.
Labor disputes.
Although now resolved, tense contract negotiations between UPS and the Teamsters had companies preparing for the potentially historic strike by shifting goods typically handled by UPS to other vendors and considering alternate modes.
Severe weather.
Earlier this summer, wildfire smoke shut down the Port of New York and New Jersey, trapping goods in the busiest container port on the East Coast. Disruptive weather events like this are intensifying across the country, shutting down more roads more often and for more extended periods – making every point where freight idles in transit a liability.
In addition to amplifying driver injury and shippers stress, extreme weather rattles the stability of the economy as a whole, with estimates that the loss of labor from excessive heat alone will cost the economy $500 billion per year by 2050.
Implement tools that help combat disturbances.
Despite all the disruption, the demand for freight isn’t slowing down, and increasing market volatility will only make traditional shipping methods less reliable and more expensive to navigate. Mitigate your risk in tumultuous times by introducing alternative freight methods.
Plus, better manage your end-to-end logistics process – without hiring a pricey logistics company – by utilizing online freight services, which can help:
- shippers keep an eye on shipments in real time & save money by finding the best rates
- carriers manage their fleet more efficiently & gain access to more load opportunities
Amazon emission reporting.
In their latest sustainability report, Amazon declared that they’ll “require suppliers to share their carbon emissions data… and set carbon goals” starting in 2024.
Amazon intends to use its “scale, investment, and innovation” to provide businesses committed to decarbonizing – particularly those that help Amazon and other businesses reduce their impact – tools and products to help track and lower emissions. A few examples offered in the report include increased access to sustainable materials and help transitioning to carbon-free electricity.
“We know that to decrease our carbon footprint, we must work with our supply chain partners to help them decarbonize their own operations,” wrote the company’s vice president of worldwide sustainability, Kara Hurst, in an article on the report’s key takeaways.
Measure & report your emissions.
Don’t know how to report your supply chain emissions? Need help setting carbon goals? The Greenhouse Gas Protocol, which sets the global standards for measuring greenhouse gas emissions, offers training and tools to help you measure and manage emissions.
Minimize your carbon output.
When striving to reduce emissions, It’s common for companies to consider what The Greenhouse Gas Protocol deems as scope 1 emissions, which involve direct actions like burning fossil fuels on premises. Many likely also think about less direct scope 2 emissions, such as using electricity.
But the often-forgotten scope 3 emissions – those a company indirectly produces, such as through employee actions, waste disposal practices, or the transportation of goods – offer significant opportunities to reduce your carbon output.
A few ways to reduce scope 3 emissions include:
- switching to sustainable shipping materials
- working with environmentally conscious partners
- implementing cutting-edge freight technology such as FlockDirect®, which sends fuller trucks on smarter routes to reduce carbon emissions by up to 40% compared to traditional methods
Easily withstand volatility & reduce emissions with Flock.
Offering all of the benefits of TL while avoiding the disruptions prone to LTL, FlockDirect® is a carbon-cutting, hubless solution that not only mitigates the cost of disruption but helps you thrive in volatile times.
FlockDirect® uses our patented shared truckload technology to smartly find and fill trucks’ empty spaces with multiple shippers’ freight. Then moves it all on a direct, terminal-free route.
By offering shippers access to untapped trailer space and helping carriers move fuller trucks on more efficient routes, FlockDirect® better enables both parties to withstand market disruptions. If you’re a:
- shipper wanting more flexibility while cutting costs by up to 20% and slashing CO2e emissions by up to 40% compared to traditional modes, book a demo
- carrier ready to easily keep your truck full with access to more loads and better routes that lower your emissions and earn you up to 25% more per haul than traditional methods, haul with Flock