Ryan: Welcome to the August edition of the C.H. Robinson Edge video. I'm Ryan Hammett, joined as always by Mat Leo to discuss developments impacting freight markets and shipper strategies.

This month, we're going to discuss where we are in the truckload market cycle and what that could mean for 2027, why LTL pricing has increased so dramatically this year, and what is really happening in the ocean market as rates soften but network conditions remain uneven.

Mat: And I think we should start there with the ocean trade this month. So, at a first glance, the ocean market looks like it is improving. Rates are easing, booking windows are shortening, and import volumes have moderated from their early peaks. But beyond the surface, there's a more nuanced story because softer demand doesn't necessarily create equal relief across the network.

So earlier in the summer, a lot of cargo moved forward into May, June, and July compared to when it would have normally shipped historically. And that front-loading activity pulled demand forward and contributed to the rate increases we saw earlier in the season. And now that demand is slowing, rates are easing, and booking windows are shortening.

But it's only happening in certain parts of the market.

Ryan: So, when people hear that rates are softening, they shouldn't automatically assume all conditions have completely normalized.

Mat: No, and a good example of that is the difference between the U.S. West and East Coast. The West Coast ocean spot rates have softened and booking flexibility has improved. But the East Coast and the Gulf Coast services remain more constrained because demand remains stronger, vessel capacity remains more limited, and restrictions affecting Panama Canal utilization influence network conditions there.

So, while the rate relief may exist in one area, operational flexibility can look very different elsewhere. The import data tells the same story too. June import volumes declined from May front loading peak season but remain above year ago levels.

Ryan: Right. In many cases, shipments simply moved earlier than what historically they would be considered normal because of tariff concerns and other risks. So that means some of the slowdown we're seeing lately is more of a timing shift than a demand shift. So if you look at this visual from our August edge report showing import patterns over the last four years, can you really identify a traditional peak season anymore?

Imagine trying to be a steamship line planning capacity when the demand patterns shift this much from year to year. And despite the June slowdown, 2026, as you can see, has still been a strong year for imports. And another important point here is that network conditions often change more slowly than demand.

So steamship lines and their alliances are constantly adjusting their networks so capacity can technically exist while still being difficult to access because of constraints like equipment shortages or disruptions like Typhoon Dolphin last week, or as you mentioned a minute ago, Mat, climate-related draft restrictions in the Panama Canal that recently began.

So all of that, it reinforces the idea that two trade lanes can look similar on paper while operating very differently in practice.

Mat: Yeah, and I think that's the biggest ocean lesson here this month. And look, the ocean's a big place, right?

Ryan: Really.

Mat: And there are many global events. So you can't just lump ocean freight into one market. Instead, you need to treat it as a collection of individual lanes and networks that do impact each other, but each have their own supply and demand dynamics.

And that means that the companies who are making decisions on a lane by lane basis, instead of relying solely on broad market averages, well, they're often the ones that manage through this environment most successfully.

Ryan: Well, now let's turn our focus back to the land and start off with U.S. domestic truckload. Mat, we've spent pretty much all of 2026 so far, talking about tightening truckload capacity, higher spot rates, and the increasingly sensitive market conditions. But we're getting to the point in the year where a lot of companies are beginning budget discussions and transportation planning for 2027.

So the natural question becomes, where exactly are we in the truckload cycle?

Mat: And I think the important thing to remember is that the truckload markets are cyclical. And while this cycle has its own special characteristics, the laws of supply and demand still apply, right? And historically, the market moves through these four phases you see here. First in expansion, and then in peak, contraction, and then the trough. Right now we sit firmly in that expansion phase where rates increase year over year, capacity tightens, and carriers become more selective.

Now, looking ahead, historical timing suggests much of 2027 will likely fall within that peak phase of the cycle. And that generally means that rates are still moving upward on a year over year basis, but the magnitude of those increases begins to slow.

Ryan: Yeah, so for transportation and procurement teams, there's another distinction that's important, and that's the difference between spot and contract rates. Even if the pace of spot rate increases begins to slow down during the peak phase, contract rates typically lag those spot prices. So that means contract prices could still be increasing at a higher pace as we begin 2027. So a great example of this is looking right in the middle there on your chart that you have on the screen, Mat.

If you look at 2018, it shows that dynamic perfectly. As those blue spot year over year bars get smaller, you can see that the gray contract year-over-year bars continue to grow. So while the expansion phase is typically the most painful part of the cycle because of the rapid change in conditions, it does mean that during the peak phase, which is on track for early 2027, the market conditions will see elevated prices for shippers.

Mat: And you mentioned that the expansion phase, is the most painful, which actually reminded me. of the reaction that shippers have had in this current expansion market. So, Ryan, I'm actually going to do something here. I'm going to take a page out of your book and I'm going to throw in a bonus topic.

Ryan: Oh geez, now you're stealing my shtick here. Okay, let's see how this goes.

Mat: Well, hey, now you know how it feels. All right, so To help mitigate the pain from these pricing increases year over year, many shippers have been converting these volumes into intermodal. And historically, a lot of the shippers wait until the annual bid season to evaluate these intermodal options. But if you're contemplating modal conversion opportunities for 2027, you may consider having those conversations right now instead.

Due to the large shift in volumes, intermodal providers are already evaluating network balance, capacity commitments, and freight mix for the next year, which means that early movers typically have more options. So ultimately, if you're a shipper and you have truckload freight that could potentially be moved via intermodal, you may not want to kick the can much further. Last thing I'll say is if transit time is something that's currently holding you back, C.H. Robinson does have expedited intermodal options. So just something to keep in mind.

Ryan: All right, I'll give it to you. That was a pretty good bonus topic. So, as you talked through that, I think it does fit with our theme of early insights for 2027 planning processes. And with that, maybe let's shift over to LTL, where there's one chart that jumped out at me in this month's report, and that's the LTL producer price index. And it's kind of attention grabbing.

Mat: Yeah, at a first glance, it is pretty startling. So the LTL producer price index, which measures total prices paid by shippers, including fuel, shows an average increase of about 13% year over year for the first six months of 2026, which you can see here on the screen. But if you were to focus just on the second quarter of this year, that increase is nearly 20%.

Ryan: So I imagine most people would see a number like that in the second quarter and immediately assume that that's all because of fuel.

Mat: Yeah, probably. And honestly, they're not entirely wrong. Fuel absolutely plays a major role here. Honestly, that's a common thread between, see that spike in 2022 and today, within both those periods, diesel costs increased dramatically. So back over in 2022, diesel costs per mile were up more than 70% year over year. And most recently here in Q2, diesel costs are up more than 50%, still a lot, but not quite at 70. So fuel is a significant contributor, don't get me wrong. But the distinction here is that fuel isn't the only driver this time.

Ryan: Yeah, I think keeping that 2022 time period in context is good because back then, truckload capacity was actually expanding and truckload market conditions were actually softening. And that's the opposite of experience of what we've had here in 2026. So that's why having complete context for historical data is important because the current state does differ than what was happening back in the same time period that looks like this one, 2022. So we can't assume that the same results we can have those as we move forward towards 2027.

Mat: Exactly. And earlier I talked about how truckload capacity pressures and increased rates have pushed volumes into the intermodal space. The same is true for LTL. Those what we call tweener shipments, the ones that can go in between full truckload or consolidator LTL, and those have been shifting back into the LTL space. And that means that shippers aren't just dealing with these larger fuel surcharges in LTL pricing. They're also seeing increased line haul pressure. And that's why this current period is different. It feels different.

The combination of rising fuel costs and tightening transportation capacity has created one of the most significant pricing shifts the LTL market has ever experienced. In fact, the increase from the first quarter of this year to the second quarter is actually the largest quarter to quarter price acceleration in the history of this index.

Ryan: Wow. So I think that the takeaway isn't simply that, okay, yes, fuel is expensive, but rather there's multiple pricing forces that are pushing the LTL market in the same direction, which means shippers should be considering some practical steps they can take for the rest of this year and also going into 2027.

Mat: Yeah, I would say first, look for opportunities to consolidate freight and improve shipment density. Second, consider diversifying carrier relationships because what fit into a carrier's network previously, it honestly may not be ideal now. And third, improve shipment accuracy. And I know we're kind of going back to basics here, but honestly, incorrect dimensions or weights can result in what's ultimately avoidable cost through reclassifications and accessorial charges.

Ryan: Or if I said it another way, this isn't the time to assume that transportation inflation is simply going to fix itself. Market conditions across modes continue to trend upward, which means shippers should actively look for efficiency opportunities as the pricing environment evolves. So when we look across everything we've discussed today, the common theme is preparation. And Mat, how would you sum all of this up for us?

Mat: I'd say that in ocean freight, it just means remembering that softer rates don't automatically translate into easier execution. On the truckload side of things, that means recognizing we're in an expansion phase and beginning to think about what a peak market could look like in 2027. And as for LTL, it means understanding that pricing pressure is being driven not only by fuel, but by tightening transportation capacity as well.

Ryan: So I'll wrap all of this up by saying that the companies that perform best during market transitions are usually the ones making plans before those transitions fully arrive. Thanks for watching, and remember, C.H. Robinson brings you the edge you need to successfully manage your transportation strategy. We'll see you next month.