North American Freight Market Insights

TOP STORY: One month does not make a trend, but the market has something to watch

A leading question from most participants in the truckload market is, “When will the market be shifting to the early phase of recovering balance?” Realistically, knowing when that might occur is less than precise since each of the market phases are descriptors of the market cycle versus mathematical representations of the market.

Perhaps the market will experience some improvement in balance as the year progresses due to an increasing number of corridors displaying a balance in tension along with stabilized and increasing prices. Perhaps the market is currently in the latter half of the "oversupplied" phase, working toward recovering the market to balance.

The DOT carrier operating authority from FTR and jobs insights from BLS (Bureau of Labor Statistics) seasonally adjusted trucking jobs figures offer some perspective. However, it’s important to note that as the market moves toward the beginning of the next cycle with recovering balance, spot market tension and route guide performance may display the market shift before the balance is evident in capacity and labor figures.

Recent insights offer some context on the table above:

• Net revocation of operating authority represents all the reasons—both voluntary and involuntary—operating authority is revoked and reinstated. The figure is a net loss in operating authority.
• New carrier creation represents newly created operating authority. It includes new entrants to the industry and carriers reincorporating under a new name and operating authority. The figure is a net gain in operating authority.
• Net operating authority change. This figure is the sum of net revocation and new authority figures published by FTR in their April Truck report.
• BLS trucking job change is from the BLS April 7 employment report. It shows the net change in trucking jobs. Note that BLS largely captures trucking companies with payroll, leaving self-employed (most owner-operator) carriers not counted.

In assembling these market references, it is possible that carriers across the spectrum from self-employed owner-operators to payroll based fleets, experienced a net contraction for U.S. trucking in February.

While one month does not make a trend, the March preliminary trucking jobs figures from BLS shows a growth in fleet carriers. On the surface, this presents a conundrum. It seems implausible that trucking capacity expanded in March with the market nearing a year of surplus capacity to available freight. A more likely scenario is that the continuing high levels of net revocation of operating authority in the owner-operator community results in some fleets adding drivers with some months being growth months and others contraction.

The truckload capacity market is experiencing some fluid movement in and out of the market as well as within as it strives to bring some balance broadly between market freight volumes and active capacity.

Now is an exceptional time to work on a full load strategy before the next up-cycle. Connect with a C.H. Robinson representative to learn more about segmenting your portfolio of truck and intermodal lanes by key market and discuss process attributes that can enhance your procurement and route guide results during all phases of the market cycle.

Dry van is the largest segment of the truck market. It is often the primary reference for the U.S. truckload market performance. For context, the dry van spot market is a bit tighter than the loose year of 2019. It seems to have bottomed out with little change in the experience accessing capacity.

Shown here is the nationwide U.S. DAT LTR for dry van spot market for the years 2018 through 2022 and the first 15 weeks of 2023 plotted in red. Week 15 LTR was 1.6:1 and the 5-year average was ~2.7:1. It seems likely this market will moderate a bit in this range for the near term.

Refrigerated truckload is following a similar pattern to dry van, matching the patterns of 2019 and 2020. Seasonal and regional tension impact this mode of trucking as spring brings early harvest of produce in Florida and expands across the United States with growing and harvest seasons.

This year may not result in some of the historical produce season tensions due to the level of available capacity. Week 15 was 2.6 against the 5-year average of ~5:1.

Fresh produce season will introduce additional regional pressures that follow growing regions in the South and their northward migration into the fall.

Today’s flatbed spot market continues to offer plentiful capacity in most markets with LTRs well below historical averages and spot and contract pricing closely aligned. Week 15 load to truck ratios were 11.6:1 against the 5 year average of 48:1.

National averages are helpful for aggregate perspectives of the market. But trucking is a very regional business. Each week displays the varying experience of the trucking market. Shown below is week 15, April 9–15, 2023.

When developing truckload strategies and evaluating performance, consider the broader market capability. Some markets are in balance while others may be over or undersupplied against meaningful volumes, where other markets may have little trade and freight. The freight experience in these markets should influence strategy and they will vary as the annual cycles are experienced.

Note how the colors indicate different ranges of LTR by each of the three truckload services. Some lanes from an origin may perform better or worse than the LTR might indicate. Research and experience confirm that an origin-destination pair can have more or less attractive features to the capacity market than the regional average tension might indicate.

Dry van displays a green level (2.2 to 3.4 LTR) broadly across the United States with some balance displayed east of the Mississippi River up to the East Coast. The national average is 1.6:1 against a 5-year average around 2.7:1. Broadly speaking, spot market capacity is readily available in all markets when a day's lead time is offered.

Expect the southern growing regions to show the first signs of produce harvest. Those first markets will be Florida, the Texas Valley, and Southern California. National LTR average for week 15 was 3.2:1 range against a 5-year average around 7:1.

Today’s flatbed spot market LTR shows some regional tension in Louisiana, Alabama, and Mississippi. Broadly, the flatbed market offers plentiful capacity for spot and contract services nationwide.

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. Most analysts are now offering that a material shift from 75% (some analysts suggested an even smaller share) of freight in the contract market in 2021 and early 2022 back to roughly 85% (some suggest a bit more) of freight in the contract market currently.

Companies commonly use waterfall (or hierarchical) route guides to manage awarded freight on lanes with some level of demand pattern predictability. 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.

Two key metrics of route guide performance are first tender acceptance (FTA) and route guide depth (RGD). RGD refers to how far into a route guide a shipper must tender shipments before carriers accept loads, or the average number of tenders per load. FTA is a percentage of how often the first awarded transportation provider accepts their shipment tenders.

These insights are from the week of April 9–15 and also reflect on RGD from the month of March 2023.

The regional view continued to show the Northeast displaying the most challenging RGD, while also offering the greatest improvement. The February national average RGD improved by 3% M/M and resulted in a 31% reduction in RGD compared to February 2022.

The week of April 9-15 offers a virtually unchanged RGD report compared to four weeks prior. The Northeast pattern continues with the highest RGD of 1.19, which is improved from 1.28 last month. The national average is at 1.14

Broadly speaking, route guides are performing 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 the United States through the week of April 9-15.

This FTA is slightly better than February's 90%. The year over year (Y/Y) comparison is 82% for March 2022.

Broadly speaking, 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 those that are unattractive to carriers for one reason or another.

Aside from load attribute issues, such as unpredictable load tenders or short lead time, route guides continue to show the Northeast region is underperforming in comparison to the balance of the country.

Loads with length of haul under 400 miles continue to show higher FTA and lower RGD than other distance bands. Carriers are accepting all distance bands much more readily with a recent correction as shown in the image above.

For March, the shorter distance bands outperformed the long distance band

• Short haul (less than 400 miles) posted an improvement in RGD of 1% from February and 22% improvement Y/Y—about 1.1.
• Middle distance (400–600 miles) improved 3% from February. This is a 22% improvement from March 2022.
• Long distance (over 600 miles) RGD fell back 1% from February. At 1.18 and 28% better than March 2022, this is the best RGD performance for March in the past six years.

U.S. spot market dry van truckload rate per mile insights

The latest dry van spot market cost per mile forecast is updated with the results of the first quarter’s oversupplied truckload marketplace. This forecast includes the historical seasonal influence of produce season, summer beverage season, and some fall volume to support the holiday season. Seasonal influence is muted in this market with a year-end cost per mile forecast near where the year began.

This year’s freight experience is similar to 2019, which was the market’s last oversupply year before the shutdown of economies in March 2020 and the introduction of the pandemic period.

The spot market experience and forecast will be influenced by freight volume and carrier response to the oversupplied market. Should the market respond with additional contraction of active capacity, market tension and spot market pricing would be expected to increase.

It would seem a change in the 2023 forecast is likely more dependent on the contraction of active capacity than an unexpected change in freight volume forecasts.

Shown below is the C.H. Robinson 2023 truckload dry van spot market cost per mile forecast without fuel. Like others, this forecast has been and will continue to be amended as economic forces shape freight volumes and the capacity community responds.

• The dark blue solid line is DAT’s broker cost per mile paid to carriers without fuel.
• The light blue dotted line is the C.H. Robinson forecast for 2023.
• The forecast is bounded on the bottom by the estimated cost per mile to operate a truck.

When looking at previous market cycles, the cost per mile to operate a truck has been the bottom of the market. Then supply tends to contract, creating tension and pricing inflection. The length of time a market is at the bottom varies by the economic conditions and the level of oversupply.

The C.H. Robinson April forecast shows the bottoming out at the estimated cost per mile to operate a truck twice. This monthly update continues to display some normal seasonal movement in dry van spot market pricing, but muted due to the current supply imbalance.

Contractual pricing that is very low, may result in stressed route guides during the seasonal summer bump and year end run up. It is possible if contract pricing is exceptionally low to experience some first tender rejections during the seasonal moves and higher back up pricing until the seasonal softening between summer and late fall as well as Q1 2024 unfold.

C.H. Robinson will continue to apply its broad market costs and market experience to the forecast and continue to present updates on a regular cadence. The market is evolving with freight tonnage challenged, with a 5.4% decline sequentially all while active capacity contraction appears to be occurring.

DAT national dry van linehaul cost per mile is the broker price paid to carriers per mile, which excludes fuel surcharge. The C.H. Robinson forecast is an extension of that cost. Estimated cost per mile to operate a truck is a C.H. Robinson forecast based on the American Transportation Research Institute (ATRI) historical costs to operate a truck through 2021.

When reflecting on the average cost per mile to operate a truck, note that this is a national average across the carrier community. Accordingly, it aggregates carriers of all sizes—from owner-operators to the largest fleets.

Each carrier will have a different cost to operate per mile based on a host of variables with a key variable being the amount of empty (non-revenue generating) miles the carrier experiences.

The smallest carriers tend to be involved in the spot market with a larger percent of their freight portfolio. They experience the greatest pressure on operating ratio in market periods like now, which leads to a reduction of active capacity as a result of parking trucks, scrapping older trucks, and exporting used trucks from the country.

The large portfolio of shipments C.H. Robinson handles is just one of the reasons carriers choose to haul for us. With so many load options, carriers can more easily find loads that decrease operating expenses. This in turn creates more capacity options for shippers that work with C.H. Robinson.

Diesel fuel retail pricing

In their April 11, 2023, Short-Term Energy Outlook, the EIA estimates April 2023 real retail diesel pricing at $4.22/gallon, down from $4.43 in February. For perspective, March 2022 was at $5.37. Finally, in March 2020, the beginning of the pandemic period, diesel was $3.20/gallon.

The report also forecasted December 2023 at $4.09, up from March's forecast of $3.98. Shown is the EIA's forecast for 2023 and into 2024. Continue to watch the pricing of oil and diesel in the wake of the recent OPEC announced production cut (source: Bloomberg).

The annual Roadcheck week across Mexico, Canada, and the United States is scheduled for May 16–18 this year. This three day event is when Commercial Vehicle Safety Administration (CVSA) certified inspectors conduct compliance, enforcement, and educational initiatives targeted at various elements of motor carrier, vehicle, and driver safety. The focus for the 2023 International Roadcheck week will be on anti-lock braking systems (ABS) and cargo securement.

The truckload capacity community has a historical response to the annual Roadcheck week. A small percentage of drivers take vacation. This in effect, reduces the active capacity. This reduction in capacity causes disruption in the spot market and the contract market.

The visual below shows 11 years of DAT dry van spot market LTR leading up to the three Roadcheck days, the three days themselves (indicated as Day1, 2, and 3), and those that follow. The data is broken down by loose and tight years with an 11-year average in blue.

• The green loose year is an appropriate benchmark for 2023
• The LTR does increase up to 3.9:1 on Day 2
• RGD settles back down after the event with Day +5 marking the return to the soft market LTR pattern

C.H. Robinson commissioned work with MIT's Center for Transportation and Logistics to better understand the impact planned disruptive events have on contract route guide performance. The research concluded that route guides do show some degradation in performance around Roadcheck week, but it is more muted than most scheduled legal holidays. Below are the most helpful insights from the research:

• Low volume lanes are more prone to tender rejection and backup provider rejections than high volume lanes during Roadcheck days
• Spot market usage increases as a result of increased route guide failure during Roadcheck

Roadcheck week is a plannable event that presents slight underperformance in route guides, most pronounced in low volume lanes. Most shippers have roughly 80% of their truckload volume in 20% of their lanes.

For those 80% of low volume lanes in route guides or served as direct to spot market, it might be advisable to prioritize shipments and take a proactive stance to ship early or late to minimize the access to capacity and cost impact in the spot market. For 2023, the impact is muted due to the oversupply of capacity situation.

C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are insights from conversations with carriers of all sizes to offer perspective into their top concerns over the past month. Below is a summary of the reoccurring themes.

• Awarded volumes are key to revenue stability
• Spot market reliance is problematic with low pricing and less available volume

All new equipment costs have remarkable increases. A few examples:

• New tractor costs are up $30k in 2023 over 2022
• New trailer costs are up with refrigerated trailers now costing over $100,000
• Parts supply still has some gaps that slow repairs and continue at inflated costs from before the pandemic

• Mechanic shortages and issues with fleet maintenance continue
• Drivers are more plentiful, and carriers can be more selective
• Team drivers continue to be difficult to seat
• Weekly home strategies are a core strategy for many fleets
• Pay increases from the pandemic period are holding

A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability to a more predictable experience. C.H. Robinson contract carriers have more predictable volume and as a result are interested and able to offer consistent capacity and market pricing with high performance.

Places where the global supply chain meets North American supply chains—like ports and airports—are also affected by the cyclical market and other disruptors. Here is a look at top influencers impacting imports in the United States.

Port Everglades Terminal:

• Florida's largest container port will charge a fee starting May 1, 2023, impacting dray drivers not holding a TWIC card

This will not impact C.H. Robinson customers as our contract carriers require drivers to carry TWIC cards

Charleston:

• Expect to see an increase in driver wait time at the port, chassis split charges, and crosstown fees until the SMART Pool program goes live in May

Savananah:

• Two year peak volumes have settled
• Eliminating evening hours
• Returning to pre-pandemic hours of operation

• Three-hour delays have been experienced in New York and New Jersey as a result of ILUA furloughs causing delays at the terminal gates
• Warehouse transloading services are plentiful as volumes have slowed

Chicago

• Dray driver capacity is high
• Chassis availability is drastically improved

Memphis/Nashville

• Experiencing a 2–3 hour turn for returning empty containers from intermodal marketing companies (IMCs)

Indianapolis

• No material impact on services

Minneapolis

• Experiencing available capacity and chassis

Kansas City

• 40ʹ chassis supplies are more available
• Dwell is down to 30+ days

Cleveland

• Dray carriers report limited/no chassis available for international containers
• Chassis need to be retrieved from the Container Port Depot instead of being available at the CSX yard

Columbus

• Chassis shortage has Norfolk Southern not mounting containers from the train and charging a $125 lift fee to be paid prior to gate-out

Detroit

• No material impact to services

St. Louis

• Capacity is available
• Chassis pools are dwelling 20+ days with only 4% availability

Port of Los Angeles/Long Beach

• Continue labor negotiations on a contract that expired in July 2022
• A dockworker walkout occurred Thursday April 6 and Friday April 7
• Normal operations resumed Friday evening
• Slow dispatching of workers was used the following week, with relatively normal vessel throughput
• Backlog of anchored vessels is no longer an issue

For a full market report on global forwarding, visit the C.H. Robinson Global Freight Market Insights.