Many predict freight rates will rise soon after the record lows experienced in the trucking industry last year. In 2023, transportation prices lowered to the lowest in over six years. By February 2023, the Logistics Manager’s index indicated a reading of 36.1. Anything below 50 represents a contraction, while over 50 represents an expansion. In the fall of that year, key players in the industry believed that the rates hit bottom. While economic analysts say the current conditions will last into late 2025, the timeframe may be shorter. Market trends are beginning to improve, and inventories that have reached an overwhelming excess show signs of normalizing.
What Caused The Low Rates In 2023?
The rates that the trucking industry was facing in 2023 were primarily due to the COVID-19 pandemic. During the pandemic, the number of cargo shippers moved internationally increased to unprecedented levels. The trucking companies in the U.S. also rose due to the need to transport imports to the final destination. Soon after COVID-19, demands to ship domestically decreased, and fears of a potential recession helped. As the demand lowered, the number of truckers in the market stayed the same, creating an overabundance of capacity. The result was that rates began to decrease on a monthly basis. Record inflation in the U.S. also impacted the rates.
Why Do Experts Believe That Freight Rates Will Rise Soon?
Carrier executives closely monitoring the trucking industry have recently noted indicators of market improvement. The freight market tends to operate in cycles, and based on the upward trends in recent months, the bottom has passed. The overstocking of retail inventories in 2022 is also beginning to show notable signs of unwinding. This is an indicator of customer spending, which can signify a growth in domestic shipping demand. As the need for trucking increases, so do the freight rates. More trucking companies may have to leave the market to lower capacity and increase the rates. Despite the recent growth, an extraordinary event must occur for a significant spike.
What Does This Mean for Shippers?
While improving freight rates is suitable for the market, it may not benefit the shipper. Truckers could start to abandon contracts in pursuit of higher spot rates. Shippers should begin looking for solutions to prevent any unfavorable situations. Measures they can take include strengthening their relationships with carriers and carefully plan their supply chain. Shippers can also offer more volumes to trucks to remind them of the partnership. As the market starts to recover, shippers may have to lock down contracts with carriers sooner.
One of the best ways a shipper can prepare is by using the help of a freight broker. Freight brokers are the middleman between the shipment owner and the trucking company moving the goods. Along with ensuring that the cargo reaches its final destination, they provide many benefits for the shipper. For example, they negotiate the shipping price, identify the right carrier partner, and ensure that the shipment complies with regulations. Contact A1 Freight Solutions at 305-677-8323 or info@a1wwl.com for a quote for beginning your shipping journey. We are in contact with an extensive number of carriers that are to move your cargo anywhere across the U.S.