It certainly has been a bumpy ride for transportation professionals over the last few years. All transportation modes have seen tremendous price and capacity volatility since COVID and 2024 was no exception. US trucking markets experienced an extended period of readily available capacity and low rates, allowing shippers to refine their transportation strategies and re-calibrate their carrier bases and routing guides. However, global ocean markets faced significant challenges due to geopolitical and weather disruptions in key maritime routes like the Suez and Panama Canals. When one includes the East and Gulf Coast port labor unrest (strikes and threat of strikes) in the mix, it was certainly a difficult year for all ocean freight stakeholders.
Over the coming weeks, we will be providing our outlooks for 2025 for truckload (TL), less-than-truckload (LTL), ocean, and parcel freight markets. While we are not naïve enough to think our crystal balls will predict the future with absolute certainty, we do hope our thoughts help shippers pragmatically plan for, and navigate, the complexity and volatility that 2025 is likely to bring.
2025 Truckload Market Outlook
Before we attempt to predict the future, let’s review the past year in the truckload space. As a market with many buyers (shippers needing to move stuff) and many sellers (trucks wanting to haul stuff), truckload is often considered a perfect case study where neither buyer nor seller can control the market.
The highly deflationary phase of truckload pricing in 2023 (driven by supplier over-capacity) positioned the market such that pricing could not go much lower. So, 2024 was a mostly stable year where rates were generally flat overall. Yet, most shippers we talked to felt there were decided differences in the 1st half versus the 2nd half of 2024. While early 2024 was most similar to the depressed rate environment of 2023 (i.e. a time when capacity and cost savings were easy to come by), the 2nd half of 2024 saw the early building of rate pressure. Tender rejection rates were rising (albeit off an extremely low base) and the concept of pre-awarding volume to incumbents ahead of network RFPs to take some risk off the table was now entering strategic conversations. By fall, it finally appeared that enough carriers and capacity had left the industry and that we had come off the proverbial bottom of the market.
We acknowledge there are numerous “flavors” of truckload transportation based on combinations of:
- Equipment type: dry van, temperature-control, flatbed, bulk, intermodal
- Geographic coverage: national, regional, local
- Length of haul: long-haul, medium-haul, short-haul, and shuttle
- Contracting options: dedicated, one-way contract, one-way spot
Capacity and pricing trends in all these different iterations will of course have significant variation. When we talk generally about the “truckload market”, we are referring to dry van, one-way contract carriage as that is the largest and most common variety.
As we steer into 2025, the trucking industry finds itself at a pivotal crossroads. The oversupply of trucking capacity has been corrected. The question will shift more to freight demand. With the ever-changing consumer, evolving regulatory and political landscapes (fewer new regulations, but more new tariffs?), and significant technological advancements (alternative fuels, autonomous/electric trucks, AI), logistics professionals will likely be presented a mixed bag of opportunities, challenges, and hyperbole. On one hand, steady, albeit modest, GDP growth is projected to sustain freight demand. Tariffs may even stimulate or pull forward demand. Yet, inflationary pressures continue to linger, impacting fuel prices and operational costs for carriers.
So where does all this lead in regard to pricing for truckload freight? We expect the slow pace of price increases seen at the end of 2024 to carry into 2025. With capacity more in balance to demand, this year is likely to revert to the more “normal” years seen a decade ago. Before the massive, COVID-induced inflationary and deflationary cycles in TL pricing, the average market movement for TL was 2-3% per year. Even taking into account the swings of the pandemic cycle, the most recent 12-year period for TL freight prices has yielded a compound annual growth rate (CAGR) of only 2.3% (Source: DAT). Pressure will build as we move through the year, with the larger increases coming in the 2nd half of the year. Tighter capacity will lead to spot rates finally exceeding contract rates and thus pulling contract rates upward. Thus, we expect overall truckload rates to increase 2-4% in 2025.
Conclusion: Staying Ahead of the Curve
In the wake of incessant volatility and disruptions, supply chain resilience remains a top priority for businesses across all sectors. The trucking industry is no exception. Shippers must build this resilience into their transportation networks through various forms of diversification. Introducing intermodal when cost and transit times permit is one approach. Building a provider base with a mix of asset-based and non-asset-based providers and utilizing them on the lanes where they can best succeed is another. The overall size and number of provider relationships is also key. Shippers need to have a sufficient number of transport providers that they are giving consistent loads to in the slower volume times so that a sufficient number of providers are invested in their network and will “be there” when volumes spike and/or capacity tightens. If shippers have used the last 2 years to consolidate their provider base, now is the time to start expanding it a bit. It also could be time for some shippers to evaluate the size and mission of their dedicated fleets as yet another arrow in the diversification quiver.
Shippers should also look inward at how to drive efficiency and improvement in their own operations. Efforts to minimize the time carriers spend waiting at shipping and receiving locations not only enhance the efficiency of a shipper’s current providers but also increase the likelihood of retaining their interest when capacity becomes scarce. It is crucial to establish oneself as a preferred shipper before providers begin prioritizing service to more efficient shippers.
In 2025, the truckload rate landscape will be shaped by a confluence of economic, regulatory, technological, and societal factors. For industry stakeholders, staying informed and adaptable is essential. By proactively planning for these dynamics, carriers and shippers can navigate the road ahead with confidence, ensuring not only survival but success in a rapidly evolving market. Buckle up!
This is the first article in a series of articles from the North America Transportation Practice, here is the second: 2025 Less-than-Truckload (LTL) Rate Outlook: Change is in the air – Argon & Co
The final and fourth: Ocean Container Trade Outlook: Rates, Capcity, Peak Season and Global Turbulance
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