North American Freight Market Insights

TOP STORY: Plan for Memorial Day

Memorial Day, like other planned disruptive events to the truckload market, offers a varied experience depending on the market cycle. With a loose market, expect a muted impact. However, this does not suggest that planning for the holiday is not beneficial.

Top line disruptive attributes

• Active capacity is disrupted: Drivers take the holiday off and likely the preceding Saturday and Sunday as well
• Shippers ship more leading up to the holiday
• Shippers ship more after the holiday to make up for the down day
• Trucks are a day off normal rotation, starting on Tuesday—causing possible concern for anticipated capacity later in the week

Memorial Day is one of the holidays studied. The research focused on truckload hierarchical route guides and how they perform around disruptive events. Memorial Day appears to be the least disruptive event of the major holidays in the United States, requiring only a minimally amended strategy.

Shippers should consider tendering higher priority contract and spot shipments on day -2 or +2 to help ensure performance. While Memorial Day is a less disruptive holiday to truckload shipping than other holidays, there will be some regional and shipper-specific experiences that underperform to the national averages discussed here.

Seen below are refrigerated and van load to truck ratios (LTRs) for average, tight, and loose markets. So far, 2023 is considered a loose market so the green history line is a possible indicator of what to expect in the spot market for both van and refrigerated capacity.

Dry van nine-year history

Chart summary: Business days shown only. M.D. is Monday, Memorial Day. Negative days (-) are the days leading up to positive days (+) are those after Memorial day.

Refrigerated nine-year history

Despite the very low LTR, Memorial Day is not a good shipping day. The ratio is misleading due to exceptionally low levels of posted loads and trucks to the spot market as drivers observe the holiday. 

After the holiday, LTR does not settle fully back to pre-holiday levels. LTR continues to climb due to seasonal load volume growth against flat truck volume growth.

Dry van is the largest segment of the truck market. It is often the primary reference for the U.S. truckload market performance. For context, the dry van spot market is experiencing the same LTR as 2019 and 2020 with the market leaning into the beginning of the spring harvest and summer beverage season.

Shown here is the nationwide U.S. DAT LTR for dry van spot market for the years 2018 through 2022 and the first 19 weeks of 2023 plotted in red. Week 19 LTR was 2:1 and the 5-year average was ~3.5:1. With the oversupplied market, we can expect some seasonal patterns, but it will be muted compared to tighter capacity years.

Refrigerated truckload follows a similar pattern to dry van, matching the patterns of 2019 and 2020. Seasonal and regional tension impact this mode of trucking as spring brings early harvest of produce in Florida and expanding across the United States with growing seasons and harvest. This year may not result in some of the historically experienced produce season tensions due to the level of available capacity. Week 19 was 2.8 against the 5-year average of ~6.2:1

Today’s flatbed spot market continues to offer plentiful capacity in most markets with LTRs well below historical averages and spot and contract pricing closely aligned. Week 19 load to truck ratios were 10.1:1 against the 5 year average of 46:1.

National averages are helpful for aggregate perspectives of the market. But trucking is a very regional business. Each week displays the varying experience of the trucking market. Shown below is week 19, May 7–13, 2023.

When developing truckload strategies and evaluating performance, consider the broader market capability. Some markets are in balance while others may be over or undersupplied against meaningful volumes, where other markets may have little trade and freight. The freight experience in these markets should influence strategy and they will vary as the annual cycles are experienced.

Note how the colors indicate different ranges of LTR by each of the three truckload services. Some lanes from an origin may perform better or worse than the LTR might indicate. Research and experience confirm that an origin-destination pair can have more or less attractive features to the capacity market than the regional average tension might indicate.

Dry van displays a low level of tension (2.2 to 3.4 LTR) broadly across the United States with some balance displayed in the Southeast as the early produce season harvest pulls on refrigerated capacity in Florida and Georgia. This visual displays its disruptive influence in the dry van market.

Refrigerated trucks participate in the dry van market when refrigerated loads are not readily available. Produce harvest pulls that dry load capacity back to refrigerated, effectively reducing the active capacity available for dry van freight. The national average is 2:1 against a 5-year average around 3.5:1. Broadly speaking, spot market capacity is readily available in all markets when a day's lead time is offered.

Note the growing regions of Florida and southern Georgia display yellow colors as the early signs of the produce season influence LTRs in that area. The markets that will follow for produce harvest include Texas and southern California. National LTR average for week 19 was 2.8:1 range against a 5-year average around 6.2:1.

Today’s flatbed spot market LTR shows some regional tension in the south from East Texas, eastward. Broadly, the flatbed market offers plentiful capacity for spot and contract services nationwide.

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. Most analysts are now offering that a material shift from 75% (some analysts suggested an even smaller share) of freight in the contract market in 2021 and early 2022 back to roughly 85% (some suggest a bit more) of freight in the contract market currently.

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 first awarded transportation provider accepts their shipment tenders.

These insights are from the week of May 7–13, and also reflect on RGD from the month of April 2023.

The regional view continued to show the Northeast displaying the most challenging RGD, while also offering the greatest improvement. The March North America average RGD improved by another 2% from March to April. That is on the heels of a 3% month over month (M/M) improvement in March. The result is a 19% reduction in RGD compared to April 2022.

The week of May 7 –13 offers a virtually unchanged RGD report compared to four weeks prior. The Northeast pattern continues with the highest RGD of 1.14, which is slightly improved from last month 1.17. The North American average is slightly improved at 1.13 from 1.14 last month. Route guide depth is about as good as can be achieved and a clear signal of the supply demand market balance condition.

Broadly speaking, route guides are performing well, with primary service providers accepting loads at 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 May 7 – 13.

This FTA is unchanged from March. The year over year (Y/Y) comparison is 85% for April 2022

Broadly speaking, today’s market is flush with capacity. Load tenders from hierarchical route guides are typically accepted by the primary awarded supplier. When rejected, they tend to be those that are unattractive to carriers for one reason or another.

Aside from load attribute issues, such as unpredictable load tenders or short lead time, route guides continue to show the Northeast region is underperforming in comparison to the balance of the country.

Further evidence of an oversupplied for-hire truckload market is that all distance bands are largely experiencing the same route guide performance. Route guide depth is largely at 1.1 to 1.2 depending on the distance band with short haul doing the best and medium and long haul about the same performance.

This is a marked change from 2021 and early 2022, where the middle and long distance bands saw a great deal more tender rejection, requiring more backup route guide coverage.

For April, the shorter distance bands outperformed the longer distance bands, but not by much:

• Short haul (less than 400 miles) posted an improvement in RGD of 1% from March and 17% improvement Y/Y—about 1.1.
• Middle distance (400–600 miles) improved 2% from March. This is a 22% improvement from April 2022. 1.17 is the lowest RGD for April in the last six years.
• Long distance (over 600 miles) RGD improved by 3% from March. At 1.15 and 19% better than April 2022, this is the best RGD performance for April in past six years.

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

The latest dry van spot market cost per mile forecast is updated with the results of first quarter’s oversupplied truckload marketplace. This forecast shows the historical seasonal influence of produce season, summer beverage season, and some fall volume to support the holiday season. Seasonal influence is muted in this market with a year-end cost per mile forecast near where the year began.

This year’s freight experience is similar to 2019, which was the market’s last oversupply year before the shutdown of economies in March and the introduction of the pandemic period.

The spot market experience and forecast will be influenced by freight volume and carrier response to the oversupplied market. Should the market respond with additional contraction of active capacity, market tension and spot market pricing would be expected to increase. It would seem a change in the 2023 forecast is likely more dependent on the contraction of active capacity than an unexpected change in freight volume forecasts.

The latest forecast includes the results of the first quarter’s oversupplied truckload market. The historical seasonal influence of produce season, summer beverage season, and some fall volume to support the holiday season all occur.

That said, seasonal influence is muted in this market with the year-end cost per mile forecast near where the year began. The spot market experience and forecast will be influenced by freight volume and carrier response to the oversupplied market.

As of May 15, 2023, the C.H. Robinson forecast shows the bottoming out at the estimated cost per mile to operate a truck twice in 2023. This monthly update continues to display some normal seasonal movement in dry van spot market pricing, but is muted due to the current supply imbalance.

Cutting 2023 dry van spot market forecast from -16% Y/Y growth to -20% Y/Y growth
The bottom is in. We are at, or very near, the bottom in spot rates for this truckload downcycle. Last week’s DAT national van spot rate was at $1.50—this is a nickel below the carrier break-even band of $1.55–1.60/mile.

The capacity rationalization process likely started in earnest in the first quarter of 2023 with higher levels of carrier bankruptcies and net carrier operating authority revocations. The large public carrier's tractor counts declined 1.6% quarter over quarter (Q/Q) in March 2023. This represents the first sequential decline since the second quarter of 2021, when tractor production was constrained by the semiconductor shortage.

Freight volumes took another leg down March–May
Freight volumes, especially in the retail industry, took another leg down in March and April, beginning to stabilize in May. This is similar to the condition during the March to May timeframe of 2022, when spot rates declined 30% over 12 weeks.

Note, this is also the absolute seasonally weakest part of the year with a 5-week period of strong seasonality starting with Safety Week (5/15), produce finally starting to ramp up, the Memorial Day channel fill, and finally 4th of July channel fill.

Costs model higher in the second half of the year based on seasonality, weakish freight volumes, but also less supply in the market
The base case assumption for the economy underpinning our truckload cost forecast is a mild 2-quarter recession in 2023—potentially spilling into 2024. Note that freight tends to lead the broader economy.

High inventory levels pressured freight volumes in 2022, however inventory levels are much more reasonable at this point and probably have more of a neutral impact on freight volumes.

This bottoming process of supply rationalization takes time; the freight cycle likely won’t turn up until early 2024.

C.H. Robinson 2023 truckload dry van spot market cost per mile forecast without fuel reflects a 20% Y/Y decline in cost
Like others, this forecast has been and will continue to be amended as economic forces shape freight volumes and the capacity community responds.

• The dark blue solid line is DAT’s broker cost per mile paid to carriers without fuel
• The light blue dashed line is the C.H. Robinson forecast for 2023
• The cycle floor (red band) is set by the estimated cost per mile to operate a truck
• Forecast change Y/Y is full year 2023 average cost/mile vs. full year 2022 average cost/mile
• The upward drift of the forecast is based on stronger second-half of the year seasonality and a reduction of active capacity

DAT national dry van linehaul cost per mile is the broker price paid to carriers per mile, which excludes fuel surcharge. The C.H. Robinson forecast is an extension of that cost. Estimated cost per mile to operate a truck is a C.H. Robinson forecast based on the American Transportation Research Institute (ATRI) historical costs to operate a truck through 2021.

When reflecting on the average cost per mile to operate a truck, note that this is a national average across the carrier community. Accordingly, it aggregates carriers of all sizes—from owner-operators to the largest fleets.

Each carrier will have a different cost to per mile to operate, based on a host of variables with a key variable being the amount of empty (non-revenue generating) miles the carrier experiences.

The smallest carriers tend to be involved in the spot market as a larger percent of their freight portfolio. They experience the greatest pressure on operating ratio in market periods like now, which leads to a reduction of active capacity as a result of parking trucks, scrapping older trucks, and exporting used trucks from the country.

A final note on contract pricing
Contractual pricing that is very low. This may result in stressed route guides during the seasonal summer bump and year-end run up. If contract pricing is exceptionally low, it is possible to experience some first tender rejections during the seasonal moves and higher backup pricing until the season softens between summer and late fall and into Q1 2024.

The large portfolio of shipments C.H. Robinson handles is just one of the reasons carriers choose to haul for us. With so many load options, carriers can more easily find loads that decrease operating expenses. This in turn creates more capacity options for shippers that work with C.H. Robinson.

Diesel fuel retail pricing

In their May 9, 2023, Short-Term Energy Outlook, the EIA estimates April 2023 real retail diesel pricing at $4.11/gallon, down from $4.23 in March. For perspective, April 2022 was at $5.38. Finally, in March 2020, the beginning of the pandemic period, diesel was $3.20/gallon .

The report also forecasted December 2023 at $3.79, down from March's forecast of $4.09. Shown below is the EIA's forecast for 2023 and into 2024.

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 over the past month. Below is a summary of the reoccurring themes.

• Awarded volumes are key to revenue stability
• "Dedicated" service awards are a primary focus for larger fleets
• Spot market reliance is problematic with low pricing and less available volume
• California is seen as an exposure to fleet networks currently and carriers are reducing California lane volumes as a result

All new equipment costs have remarkable increases. A few examples:

• Delivery of tractor and trailer orders are being received as planned
• Costs for new equipment continues to be exceedingly high
• Parts availability has improved and as a result there are fewer delays related to maintenance

• Drivers are more plentiful, and carriers can be more selective
• Driver pay has stabilized for 2023

A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability to a more predictable experience. Our contract carriers have more predictable volume from C.H. Robinson and as a result are interested and able to offer consistent capacity and market pricing with high performance.

Places where the global supply chain meets North American supply chains—like ports and airports—are also affected by the cyclical market and other disruptors. Despite the recent growth in import volumes being roughly 9% higher than March and 5% higher than April 2019, pre-pandemic, ports are largely performing well with plentiful chassis, boxes, and flatcar access. Below are a couple of the notable exceptions.

Ohio and Memphis continue to see increased rail volumes compared to previous months. Central U.S. chassis pools are still struggling with dwell times (20+ days) and sporadic equipment availability, especially in St. Louis.

The inland rail segment (BNSF) north of St Louis was also down due to flooding for 10 days, which is impacting some inland routings into the Midwest. Overall chassis imbalances and attempts to have drivers reposition through returning equipment between pools is causing additional chassis splits and empty miles across the Midwest on Ohio Valley markets.

Los Angeles/Long Beach and Oakland continue to deal with equipment shortages with regards to chassis availability in May as volumes uptick.

Lanes to Dallas and Houston are currently most problematic with limited equipment availability. Denver outbound volumes rose quickly in early May, and now there are similar trends in Detroit.

For a full market report on global forwarding, visit the C.H. Robinson Global Freight Market Insights.