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

This month, we're going to focus in on three topics. First, what's happening across global markets, including both ocean and air freight. Second, the evolving story around fuel and why rising costs impact more than just the fuel surcharges. And then finally, we're going to discuss our newly released 2027 truckload forecast, including the flatbed forecast for the first time.

So Ryan, before we get to that, I know that you've been focusing a lot on global markets recently. So why don't we start there?

Ryan: Yeah, sure. So when we look across the global markets this month, one theme continues showing up, which is cargo is still moving, but there are bottlenecks that make movement of goods challenging. We're seeing disruptions in very different places around the world that are making execution just a challenge.

For example, in Asia. Recent typhoons have caused congestion and vessel bunching at major gateways like Shanghai and Ningbo. Those ports remain open, but carriers are dealing with schedule challenges, blank sailings, and cargo backlogs that can take weeks to unwind. In Europe, low water levels on key inland waterways and rail infrastructure constraints are reducing the flexibility across the European transportation networks.

And speaking of low water, the Panama Canal, it's back. There are some restrictions with lower draft allowances and fewer transit slots, which reduces flexibility on affected ocean services. If transit reliability worsens there, we could begin to see some shippers shift small volumes of those high volume time sensitive freight from ocean to air.

And then there's our old friend, the Suez Canal. We had started to see a limited return of carrier services through the Red Sea, which was encouraging, but we're going to have to keep eyes on that as recent developments in the Bab el-Mandeb Strait are a reminder that carriers have to evaluate security conditions in real time.

So I'd say right now, it isn't necessarily about a lack of global capacity. It's about the transportation network having fewer recovery options when something goes wrong. And if something does go wrong along the way, there's just fewer alternatives available.

Mat: Yeah, and we're seeing that same story play out in air freight too. Capacity is still available on many lanes today, but pressure is building on specific trade lanes as we move later into September. I would say that the quarter-end shipments, China's pre-holiday shipping surge, and technology-related freight are all driving demand.

And of course, AI infrastructure continues to be one of the biggest demand drivers in the market.

Ryan: That's the theme of the year.

Mat: Yeah. So think of things like servers, semiconductors, server racking, and all the other data center equipment. It's consuming capacity on major Asia to Europe and trans-Pacific lanes. And what's interesting is that it isn't a broad-based air freight surge. It's highly concentrated around the technology-producing regions and also the time sensitive cargo.

And what that means is that some shippers, they may face tighter booking windows, even while the overall market conditions appear relatively balanced.

Ryan: The other trend we've been talking about is that transportation challenges increasingly happen after cargo leaves the vessel or the aircraft, and it's happening in multiple regions. It's happening with road congestion around the Manzanilla port in Mexico.

You've got rail constraints in Europe and there's equipment and inland transportation challenges at various gateways. So the handoff between transportation modes is becoming just as important as the international move itself. A shipment could arrive on time and still encounter delays getting to its final destination.

So for global transportation right now, I'd say the bottom line is that margin for error is getting smaller. It's a good time to review your critical lanes, validate your backup routings, confirm your lead times, and make sure your alternate transportation options are workable before a disruption forces a last minute decision.

Mat: Yeah, good call. So let's change topics and move over to the topic of fuel. We all know that fuel prices have a direct impact on transportation via the fuel surcharges. but it also influences global supply chains beyond just transportation costs. And we're seeing an interesting dynamic in the global energy markets as markets look for more sources of oil.

Long-term supply fundamentals have been, in a word, volatile. And while ongoing military conflicts in the Middle East and deadlock negotiations have repeatedly limited Gulf production and or distribution, Global energy markets are becoming more diversified with countries like Brazil, Guyana, and Argentina continuing to add production capacity. But the global fuel supply or fuel supply chain, excuse me, to utilize those new sources at scale is going to take some time.

So in the near term, diesel markets specifically will remain tight due to inventory levels as well as refining capacity and geopolitical uncertainty. So fuel is expensive and likely will continue to be so in 2027. And pretty much end of the story, right?

Ryan: Exactly. And one of the most overlooked impacts of higher fuel cost is how it changes the choices between modes. So let's go back to air freight as an example. If fuel costs increase significantly, well, urgent shipments, they're still going to fly. But non-urgent freight can quickly migrate towards ocean. So suddenly a transit time that's 10 days longer might become acceptable if the cost difference widens enough.

And quick aside, one quick educational point around airline fuel surcharges that I heard in the last week. When people hear fuel surcharge, they often assume that every airline is applying the same fee. In reality, carriers use different methodologies. So some apply a percentage based surcharge tied to a jet fuel index.

Others are going to use a per kilogram charge that varies by origin and destination. As those fuel prices rise, surcharges increase alongside the underlying cost, amplifying that all-in price of air freight. And for shippers, the real conversation shouldn't just be about the fuel and the surcharges. It's how all of these dynamics combine to change the economics of speed. At some point, the value of saving 10 days doesn't justify the premium, and that's when freight starts looking for a slower, cheaper option.

Mat: Yeah, that's a great example. And I'll say the same thing happens domestically here in the States, because as diesel, you know, well, it's definitely been in the headlines the last few weeks, you know, as the average cost approaches $6 a gallon. And, you know, those higher transportation costs often encourage consolidation strategies or just a greater use of intermodal and even just or deliberate shipment planning, like not shipping air and waiting until you have a fall truck.

So when transportation teams think about fuel, you should probably avoid just thinking about next week's surcharge because the bigger question is how fuel costs might reshape network decisions Because fuel influences routing, yes, but it also influences modal selection, inventory decisions, and ultimately it influences how freight flows through the supply chain.

Ryan: Well, let's get on to our final topic. This month, we released our first 2027 truckload forecasts. As you can see here, the expectation for dry van spot pricing in 2027 is to increase by 10% compared to 2026. And I think, Mat, I know you and I have gotten this question a lot. A lot of shippers are asking that same concept. If freight demand still feels relatively moderate, why do rates continue moving higher?

Mat: Yeah, and it's understandable, but we really, we need to stay grounded in the reality of the supply and demand dynamics. Because with continued regulatory scrutiny on drivers, I'm talking about through things like the English language proficiency or non-domicile commercial driver's licenses or the cabotage enforcement, just to name a few of those.

The forecast really is primarily focused on a supply-driven story. And with continued strain, all in that carrier availability, capacity is just unlikely to see broad softening that would lead to decreased rates.

Ryan: We've talked quite a bit over the last several months about the truckload market cycle. And historically, truckload moves through 4 phases, expansion, peak, contraction, and trough. Well, right now, we're approaching an important transition. Throughout 2026, we've been operating within the expansion phase where those rates are increasing rapidly.

As we move into 2027, our expectation is that the market begins to transition toward the peak phase.

Mat: Yeah and people hear peak and they get scared. So for clarity, peak doesn't necessarily mean that rates are about to explode. So saying it all differently, yes, rates may be increasing on a year-over-year basis, but the magnitude of those increases begins to slow. So if you look at the quarterly breakouts here, the largest increases are in the first quarter, and that's primarily due to softer comparables in 2026. And when you look broadly across the 2027 forecast, it's mostly following seasonality just at a higher baseline.

So while rates may be in the peak portion of the cycle, as you mentioned, it may not necessarily feel as impactful to shivers as it did in 2026 because for the most part, sequentially, things are expected to remain relatively flat outside of those seasonal adjustments up and down.

Ryan: And you just mentioned the baseline. So I think that's important because the baseline may shift slightly depending on where we finish out 2026, but either way, you're right, capacity remains relatively tight. And while dry van, tip controlled, and flatbed equipment are all subject to the same supply pressure of that constrained driver availability and elevated operating costs, the demand patterns are a different story between these modes.

Mat: Right. Dry van and temperature control markets generally follow similar patterns. I would say, yes, refrigerated freight does have its own seasonality and agricultural demand drivers, but the underlying market mechanics remain very similar. And honestly, there's a bit of a shared capacity pool between reefer and dry van. So directionally, reefer behaves much like dry van. I will say, though, flatbed, is a little bit different though.

Ryan: Now, before we kind of pull on that flatbed thread, hey, that rhymed, I didn't realize it. It's a good time to mention that for the first time, drum roll, we've introduced a flatbed forecast, which projects a 10% increase in 2027 compared to 2026.

Mat: Yeah, and you started to mention it, flatbed is interesting because it responds to a different set of demand signals. going back, driving is heavily tied to the consumer goods and general freight markets. Flatbed is much more closely connected to the physical investment in the economy. So think of things like construction or manufacturing activity, energy projects, infrastructural development. And of course, going back to our word of the year, data center and AI related construction.

So while flatbed still participates in those broader chocolate cycles, it still responds to those investment activities a little bit differently. It may not impact dry van in the same way. So the seasonal trends and cyclicality move differently.

Ryan: And that means flatbed forecasting requires looking beyond freight transportation itself. You have to think about where is the capital being deployed? What industries are expanding? Where is construction activity occurring? All of these industrial projects that are entering in the pipeline.

That's why flatbed can often behave differently than the other truckload segments despite operating within the same broader market cycle. And you can see those differences within the shape of the forecast curves. It's just completely coincidental they happen to both align at 10% increase next year, but that's despite very different underlying considerations.

Mat: So if we step back and look at 2027 through a planning lens, what's the biggest message for shippers? I'd say don't focus solely on that 10% year-over-year number. Keep in mind that that's an average. And due to regional footprint or shipment characteristics or even company strategy, Most companies just don't experience the average.

So instead, focus on some of the underlying inputs and where the market is within the cycle, because that honestly will be better to enable your planning if any of those assumptions change.

Ryan: I think that's a great reminder, Mat. And with that, it kind of wraps up our discussion this month. We've covered global forwarding conditions. We've talked about the broader implications of rising fuel costs and our outlook for truckload markets moving into 2027.

So we'd encourage you to always work closely with your transportation providers and pressure test these assumptions you have for next year. Begin planning for next year's market conditions before they arrive. As always, we're going to want to thank you for watching. And remember, C.H. Robinson brings you the edge you need to successfully manage your transportation strategy. We will see you next month.