North American Freight Market Insights

TOP STORY: Today's market may be going through a shift

In 2021, the U.S. trucking market saw exceptional expansion of new carrier startups. Over 100,000 new companies with fleets of 1–5 trucks were started.

This new carrier community works mostly, if not exclusively, in the spot market and is facing the pressure of falling spot market rates, record diesel costs, and decreasing spot market freight volumes.

The capacity market tends to begin to cycle in these environments as seen in the following market indicators:

• Used truck pricing in April started contracting from record heights for the first time in the pandemic period. This tends to be an indicator of carriers not expanding their small fleets or not updating equipment in an environment of less opportunity..
• Less freight is migrating to the spot market from route guides as shipment tenders to awarded carriers/brokers is increasingly accepted and when rejected is most often covered by the first back up. (Source: TMC, a division of C.H. Robinson)
• Voluntary revocations of operating authority have been increasing. The second quarter of 2022 rates are now more than double the rate seen in the first half of 2021. Source: FMCSA. Voluntary revocations do not offer the business reason why the carrier voluntarily gave up their operating authority, but are considered signals of lessening market opportunity.
• Trucking labor is experiencing growth when unexpected and not needed. (Source: BLS) Presumably as self-employed (owner-operators) discontinue operations and select the safety of employee status of a larger carrier.

Today's truckload spot market has not collapsed, it has corrected

From the exceptional tension of Q1 caused by COVID-19 related absenteeism to today's market, it is tempting to suggest that the truckload market as indicated by the spot market, has collapsed and gone into an oversupplied situation.

Perspective is helpful at this mid-year reflection and forward planning point. Shown below is DAT's load to truck ratio (LTR) for dry van year to date. The correction from Q1 to present is evident.

The five-year average pattern, however, is well established now at about 19 weeks since the drop. The volume of freight in today's freight market is reduced as displayed by load postings dropping from a high of about 2.25 million per week earlier in the year to just a bit over 1 million per week as a sustained pattern through last week.

Truck postings have been holding a narrow pattern with some downward and upward variance. This pattern is being watched closely by all market participants, but does bring perspective to the change in the market.

What comes next in terms of freight volumes and capacity shifts?

The following insights offer perspective of the spot market to help reflect and plan for the second half of 2022:.

• Economic environment: Key to this pattern is freight volume. Each business will need to discern their thoughts on H2 2022 and the resulting freight volumes.
• Supply response:
  • Will supply contract?
  • If it contracts, how fast?
  • Does the 2021 growth of 100,000 carriers mean more fragility than previous cycles?
• Spot market tension and pricing shown is national, individual markets and lanes can have much tighter and looser experiences, suggesting value in segmented strategies.
• Stay close to the market dynamics. The spot market is a good leading indicator of the broader contract market.

Spot market, committed market, and capacity insights

Spot market settled into more balanced position around five-year averages

The three primary truckload segments have seen greater balance return to the spot market load to truck ratio (LTR) with some stability in their weekly variance.

The charts below show six years of DAT's LTRs. The red line represents 2022. Between 3:1 and 4:1 LTR for dry van can be considered a reasonably balanced market, while balanced for refrigerated is closer to 6:1 and flatbed considers 20:1 balanced. The spot market is a leading indicator of the broader contract market, providing insights to market tension and direction of evolving price

Since about week 13, the van and refrigerated spot markets have offered little variance in LTR. The van market has been bouncing above and below 4:1 and the temperature controlled market somewhere around 6 or so.

The market continues to show some reluctance for additional free fall of pricing at these ratios as pricing is getting rather close to the estimated cost of operations in week 29.

The C.H. Robinson dry van spot market forecast, presented below, shows the current broker to carrier cost per mile and how it is closing in on the operations expense per mile estimate. Historically, the cost of operations has been the bottom of the market.

Dry van LTR

The dry van LTR is in the range of a balanced market. It is currently bouncing around 4:1 nationally and on a multi-week increase in LTR. Individual markets range from oversupplied to as tight as 26:1 LTR. The five-year average for week 29 is about 3.6:1

Refrigerated van LTR

Temperature controlled truckload has stabilized in the early produce season at a balanced market level of 7:1 LTR, and bouncing between 6:1 and 9:1 with a 5-year average of 6.8:1. Key growing regions across the midwest United States show ranges largely between 3:1 and 35:1, with some markets such as West Texas and Southern California displaying some of the greatest tension at the high end of the national range.

The fresh produce harvest season appears to be less robust than most seasons as a result of inflation. In the refrigerated truckload section below, this is discussed in more detail.

Flatbed LTR

Flatbed, like van and refrigerated capacity, has seen meaningful market correction, and is largely at a more balanced market. The current 23:1 LTR presents a capacity market well matched to the demand for flatbed services and below the 5-year average for this week of 30:1.

The Southeast continues to be notably tighter than other parts of the country and influences the national LTR. Please see the flatbed section of this report for additional insights.

The first half of 2022 continues to offer a shifting experience as the forces of supply and demand are unfolding. It may take until July to gain a sense of what the second half of the year might look like.

Dry van and refrigerated DAT LTR by region
The 6-year aggregated view of the U.S. spot market above is broken down below for the dry van spot market by 3-digit ZIP code regions for the week of July 10-16. This view helps demonstrate the meaningful variance of markets—some have plentiful capacity while others struggle materially to keep up with demand.

The current national average is roughly 4.1, with a range of 1:1 to over 19:1 across 3-digit ZIP code areas. Most notable are key markets of Los Angeles, CA and Laredo, TX seeing LTRs in the 13:1 to 15:1 range.

The refrigerated market is displaying a similar pattern to the van market, being near the 5-year average for spot market tension. The most tension as a result of the produce season in the Midwest as well as coastal regions. Though a muted produce season LTRs in yellow to red zones range from 7:1 to over 50:1.

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. What follows are some perspectives and notes on today’s contract truckload environment.

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 awarded primary transportation provider accepts their shipment tenders.

During the week of July 10–16, 2022, RGD by U.S. region continued to show the Northeast increasing, now back to an average RGD of 2. Other regions show a pattern of stabilization.

Broadly speaking, route guides are performing well, with primary service providers accepting loads at or near 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 July 10–16, 2022.

When looking at the Northeast region drop during the week of July 10–16, 2022, It appears that the kick off of the summer beverage season from PA was key to the run up in loads against available trucks. That balance has been restored as seen in the chart above.

The overall RGD improved to 1.28 from 1.45 a month ago. This improvement was largely driven by the Northeast with the other regions consistent month over month. Distance bands over 400 miles improved a bit month over month as well.

June FTA for North America shows continued improvement posting 86%
This is much improved from the lowest pandemic point of January 2022 at 79%.

For some pre-pandemic context:

• Week of Feb 23, 2020, FTA was 90% and RGD was 1.17
• June 2021 average FTA was 82%

It is helpful to watch both FTA and RGD metrics. There is a clear trend of continued improvement of both FTA and RGD, signaling that demand and supply are more aligned today than in the past couple years. As such, less freight is also being sent to the spot market because of failing route guides.

June RGD across distance bands
For June, all three distance bands experienced improvement in RGD as secondary providers increasingly accepted primary provider rejections. Info from the first two weeks of April and pre-pandemic comparison offers additional perspective:

• Short haul (less than 400 miles) posted ~1.25 in June, which is slightly improved from May and still elevated from 2019 and the first half of 2020 levels, which were in the 1.1 to 1.2 range.
• Middle distance (400–600 miles) is about 1.5, slightly better than May and still elevated from 2019 and the first half of 2020 levels, which were in the 1.3 to 1.4 range.
• Long distance (over 600 miles) is just above 1.5, about the same as May and like the other distances, it is slightly above 2019 and the first half of 2020 levels, which were in the 1.1 to 1.3 range.

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

Shown below is the C.H. Robinson 2022 truckload dry van spot market cost per mile index without fuel. Like others, this forecast has been and will continue to be amended as the economic forces shape freight volumes and the capacity community responds.

• The dark blue solid line is DAT's cost per mile to carrier without fuel.
• The blue dotted line is the C.H. Robinson forecast, 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.

For perspective, shown here is the spot market forecast. Analysts have offered contract pricing forecasts between 8–9% year over year (Y/Y) without fuel as carriers work to recover increasing operating expenses against optimized multi-leg routes from route guide awards.

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.

Diesel pricing outlook

As you can see in the below graph from FTR Transport Intelligence, diesel pricing plotted from the EIA forecast, will drop to roughly $4.50/gallon in 2023 as a nationwide average with the annualized 2022 cost per gallon at $4.73, down from the nationwide average spike of roughly $5.50 with California the highest point in the nation at $6.27 in mid-June.

With the forecasted decline in diesel pricing, the levels are still very high historically and will continue to be an increased cost for carrier operations where fuel surcharges don't cover repositioning miles, idle time, or out-of-route miles.

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 early in 2022. Below is a summary of the reoccurring themes.

Employment
There has been a change in employment culture post-pandemic.

• Drivers value home time more than ever
• Sick days are taken more often, impacting capacity (COVID-19 is still primary illness)
• Mechanics are difficult to find, impacting maintenance and active capacity
• Driver applications improve, drivers from small companies are applying at larger ones
• Continued upward pressure to increase pay and benefits packages

Fuel

• Fuel costs for idle time and deadhead/repositioning miles is an increasing concern
• Mixed reports on shippers’ willingness to increase rates to offset higher fuel costs

Equipment

• Long lead time (still ~10.5 months) for tractors is a continuing problem
• Price variability for new equipment is a concern
• Higher cost and scarcity of parts for maintenance continues
• Fleets are aging against the challenges to replace tractors and trailers (OEM supply chain challenges)

Imports and inland transportation

Ocean imports from Asia

• While we are entering traditional peak season on the Transpacific lane, demand is not showing the momentum seen in the past two years.
• The strength of the peak season and its effect on rate levels is expected to be milder than experienced while China’s COVID-19 related lockdowns were still in effect.
• Peak season (back to school/holiday goods) will start shipping in August through end of September.

West Coast longshoreman labor negotiations

• The current agreement between the Pacific Maritime Association (PMA) and the International Longshore and Warehouse Union (ILWU) ended on July 1.
• Talks often go past the agreement expiration date, however this year, both parties insist that normal operations will continue until a new agreement is reached, avoiding any interruptions.

U.S. airport operations challenged by COVID-19

• While recovery times at U.S. airports remain elevated relative to pre-pandemic conditions, there are fewer extreme delays as demand has softened recently.
• Even historically challenging terminals at LAX are operating rather smoothly.

For an entire portfolio of insights, visit our Global Freight Market Insights or contact your C.H. Robinson account manager.