3 Freight Trends + Strategies Shippers Need to Know from Q2 2022

Trend #1: While route guides are performing better, inflationary and deflationary pressures on rates have never been more challenging to synthesize into a confident rate outlook.

First-tender acceptance ratios are up over 20% YoY in June, and by all accounts, rate inflation has been put on hold heading into Q3 2022. This bodes well for shippers trying to maintain cost expectations in the second half of 2022.

However, the forward expectations of truckload rates are now driven in opposite directions.  Hawkish Federal Reserve policy, ongoing global conflict, the return of increased Class 8 production levels with shorter backlogs and a measurable influx of labor into long-haul truckload providers all point to the potential for over-capacity and some rate relief after two years of stressed market conditions.  

Conversely, consumer demand remains strong; unemployment is significantly down, more consumers are in prime spending age and inflation’s impact on fleet management all point to countervailing forces. These factors (and many others) point to continued rate strength, at least from a contract perspective.

Shippers are strategically applying new tendering strategies that minimize cost while maintaining and maximizing needed relationships within their carrier bases to carry them through this historic level of volatility. Given current conditions, shippers must constantly monitor and continually assess cost lever options and their speed to value as conditions change. 

Trend #2: Long-haul trucking labor has entered the market. The big question is, where did it come from?

There are some strong indications that as March spot volumes began to evaporate, a solid correlation developed to increasing fuel prices. While exact information does not exist in the owner-operator space, it’s plausible that many owner-operators moved to trucking companies as their profits vanished. And while used truck prices doubled YoY in early 2022, they are starting the retreat downward. The costs of those inflated assets overleveraged smaller carriers that overextended credit and leases. Others may have just stopped operating as inflation pressures made competing with asset-based options more difficult.

It’s essential that shippers monitor the macro-economic trends as they point to a softer rate environment, given the recent shifts occurring in historically shorter timeframes.

3. In addition to labor, the Class 8 scenario is looking better.

OEMs have reached production levels this June that are nearly on par with the last 2018-2019 bull markets. Backlog is down to 7-8 months vs. 14 months a year ago. With parts availability increasing for OEMs and many other supply chains, the risk of post-shortage inventory gluts is a genuine concern. Increased OEM production levels historically have a cooling effect on rates as capacity is expected to expand in the next 6-12 months. However, as stated before, this is only one component of mosaic countervailing forces.

Considering these developments, shippers should continue nurturing relationships with strategic carriers and evaluate low-risk options where costs can be reduced. That includes improving scheduling efficiency with fewer and fuller truckloads and minimizing drivers’ time at the dock. In addition, they should focus on reducing the number of miles driven by maximizing truckload cube and weight while staying aligned to an engineered network.

The value of measurable relationships during these periods of volatility cannot be understated. Whether engaging with a carrier or a network services partner, finding opportunities to track progress and work toward shared success is critical. 

Our general outlook for truckload rates is a flat 6-12 months plus or minus a few percentage points.  Given the 1-2% monthly inflation in 2021, we expect a more controlled environment for shippers.

Matt Harding is Senior VP of Data Science at Transplace.