North American Freight Market Insights

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Transportation Market Overview and Freight Trends

TOP STORY: Experiences and lessons from 2022 shape thoughts on 2023

Many in our industry are hopeful that 2023 brings greater predictability and less volatility to the transportation experience. The first 2023 market insights report discusses some of the 2022 influencers that carry on in the 2023 market and offers recommendations you can apply to create the best experience in any phase of the multi-year market cycle.

What’s influencing the market experience

 

Seasonal forces at work

Capacity returned to the market
The first quarter of 2023 will have a historical normalcy to it compared to this time last year. In 2022, Q1 saw high absenteeism among logistics professionals due to drivers, crossdock employees, and warehouse professionals who were sick with the COVID-19 Omicron outbreak. Effectively, active truck capacity was reduced and docks were understaffed, leaving pricing and performance to suffer as never seen before.

January and February freight volumes

The current environment mirrors other Januarys. Drivers and other logistics workers are back from vacation against historically slower months for freight. Today's truck lines are again well staffed and dock doors are better staffed than a year ago.

As such, performance is up and costs have improved. Additionally, this year slower imports and concerns for inflation and recession are weighing on near-term freight volume forecasts.

In the first quarter, year over year (Y/Y) freight volume growth is forecasted down ~5% to flattish depending on the analyst. FTR Transportation Intelligence forecast dry van and refrigerated truckload will likely see some growth, perhaps around the 1.5% range this year. Flatbed is expected to be down a similar amount for 2023.

Weather
While winter weather historically has brought some regional disruption to transportation, this winter has had some material impacts from massive rains, flooding, and record snow falls. Transportation planners at this time of year should be tuned into weather forecasts and plan for disruptions to available capacity and service hiccups.

Carry over influences from 2022

Corrected truck pricing for spot and contract markets to settle early in 2023
Spot market rates corrected downward in 2022 and are likely to settle a bit more in the first quarter of 2023. The spot market is likely to find its bottom at the estimated carrier cost of operations in April See the full forecast later in the truckload section of this report for details.

The contract market for shippers that have yet to conduct 2023 request for proposals (RFPs) will likely produce some mid-single digit reductions.

Excess truckload capacity
This seems to be the near-term reality as new tractor orders and sales continue to be strong and used truck pricing remains inflated. Carriers have an appetite to update their aging fleets, supporting new truck purchases. But while used truck pricing remains very high compared to pre-pandemic levels, the oldest tractors will not be scrapped fast enough to offset new purchases. Early signs of used truck pricing declines in the wholesale market suggest used retail prices will be dropping, an indicator of the secondary market slowing or curtailing fleet growth strategies, contributing to slower or stalled expansion of the fleet perhaps sometime in 2023.

Trucking labor
Concerns regarding labor have been tempered as a result of the volume of new entrants in 2021 that remained for most/all of 2022. Capacity shifts have occurred from owner-operator carriers to employee-based carriers.

Yet, expect carriers to continue to be highly focused on drivers since the key trucking employment demographic, the Baby Boomer generation, is rapidly working its way out of the labor market. The trucking industry is working to expand other labor demographics, like women and younger drivers but faces competition from other industries.

Fuel forecast
The Energy Information Administration (EIA) has again amended its 2023 annualized retail diesel price per gallon down. The new forecast is $4.48, down from $4.65, which is against a 2022 average of $5.09.

These figures are still well above the ~$3.00 range of 2018 and 2019. This pricing level can have an impact on truckload capacity since the majority of carriers are very small and tend to carry more non-revenue generating miles in their operating expenses than the larger fleets. Fuel pricing contributes to bankruptcy pressure when spot market rates are near the cost of operations.

Economic considerations

The economy is key to the freight industry as it creates the freight moved on trucks and trains. When budgeting for 2023, pay attention to the Logistics Managers Index, which has been showing aggregate logistics prices in a favorable trend since April 2022.

The three cost/price metrics, inventory costs, warehousing prices, and transportation prices, are aggregated in the chart below.

market cycle over supplied

Source: Logistics Managers Index.

When reading the chart above, the range of potential scores is 0–300. Anything over 150 is expansion, anything under 150 is contraction. December’s reading of 181.7 is down 72.0 points from this time last year, and 89.6 points (or 33%) down from the all-time high observed in March 2022. Much of the recent slowdown in inflation can be traced back to the reduction in logistics costs.

While the chart above shows some potential logistics price/cost relief, keep in mind that while a recession is largely expected by most/all analysts in 2023, it seems that most suggest the economy and freight market are not in a perpetual free fall. Below are some references demonstrating a bit of a mixed bag of forecasts that help with perspective on forecasting freight volumes.

  • Bloomberg consensus is expecting U.S. GDP of +0.3% and industrial production of -1.7% in 2023.
  • Consumer sector: High inflation and interest rates are slowing consumer spending, potentially causing some prolonged inventory issues
  • Industrial sector: While this sector has moderated, it has fared better than the consumer sector due to pockets of strength in auto, coal, and other bulk commodities.
  • ISM-PMI the Purchasing Manager’s Index for manufacturing came in at 48.4 for December. This is down from 49 in November. December was the lowest since May 2020.
  • In its recently issued Semi-annual Forecast, ISM reported
    "’the manufacturing outlook for 2023 would not be much different than 2022’s performance,’ which Fiore said was encouraging. ‘In looking at the business comparison piece, from the first half to the second half, the first half of the year is going to be weaker than the second half of 2022, but the second half of 2023 is going to be stronger, with 5.4% revenue growth for the whole year, which is pretty incredible,’ said Fiore. ‘You can almost argue we are going to see negative revenue growth for the first six months, and we are going to see significant growth over the second half of the year.”
    Source: ISM Semiannual Forecast presented in Modern Materials Handling
  • Chad Moutray from National Association of Manufacturers (NAM Jan 5, 2023 webinar) suggests that 2023, while showing some softening as noted in the PMI, is reporting NAM members expectations of 2.5% growth in sales for 2023 (while this is likely "nominal growth" it speaks to the relative strength seen in the manufacturing market by NAM members. Manufacturing is one the three key broad freight creation sectors. It is especially key to less than truckload (LTL) and important to truckload.
Carrier takeaways from the current cycle

 

Fleet trucking companies

Despite the oversupplied market, these three areas are the primary focus for fleet trucking companies:

Continued focus on labor
Ongoing activites to attract and retian drivers
Newer tractors Low dwell locations; predictable demand patterns Hiring women and younger drivers
Lowering maintenance costs Newer tractors Newer trailers Routing equipment back to terminals more often
Yield management/improvement
Lower market freight volumes tend to create more empty miles, increased waste, and lower yield.
More revenue generating miles/day More revenue generating hours/day Turning drop trailers more frequently

 

Small carriers and owner-operators
Expect these carriers to focus on much of the same initiatives as the fleets. However, these carriers tend to have a greater reliance on the spot market. With freight volumes lower in the spot market, there will be more empty miles between loads. As such, they will work with providers like C.H. Robinson that have the freight volumes to smooth out demand patterns and reduce empty/non-revenue generating miles.

This is key to weathering the current spot market pricing. Fully transactional loads lacking predictability will find capacity, but may experience some fluidity as carriers dynamically work the daily market to find the load that contributes the most to their yield.

LTL’s disciplined approach to pricing and higher yield freight continues
Today's LTL carriers are experiencing softening freight volumes, but against a multi-year contraction of terminal capacity and a stressed national network. Despite the softening volumes, the LTL industry is in and will continue to be in a stronger pricing position than the truckload industry.

These are the focus areas of the LTL carrier community:

  • Focus on yield through strategic selection of freight and disciplined pricing.
  • Embargo shippers and consignees with long dwell experiences.
  • Update and expand tractor, trailers, and terminals.
  • Hire drivers and crossdock workers to prepare for the second half of 2023 and 2024.
  • Grow digitization strategies with a major focus and standardization of electronic bills of lading (eBOLs).
Secure the best freight price—in any market cycle

Your success in today’s truckload and LTL transportation can be improved through strategies that improve performance. Based on research by C.H. Robinson and our academic partners, the following recommendations can help you achieve best price paid in either soft or tight market cycles:

  • Maintain an annual RFP strategy for contracting both truckload and LTL
  • Integrate a truckload spot market strategy into your route guide
  • Segment freight with spot market attributes and implement a digitally enabled spot market process
  • Continue to focus on live load and drop trailer dwell performance
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Full Truckload Shipping

TOP STORY: Truckload carrier community is evaluating the market

Today's truckload spot and contract market insights have been well published. Some key insights were outlined in the opening section of this month's report. It is also important to understand how carriers are working to discern how much of the current freight volumes are the result of the normal January down cycle versus the unfolding economic environment.

As carriers work through this assessment, their response to the market will vary based on their client portfolio, shipment award and tender patterns, services they offer, company structure, and regions served. Keep the following carrier perspectives in mind in the coming months:

  • Owner-operators are more dependent on the spot market than fleet carriers
    • Many are shifting to independent contractors or selling their truck to become an employee at a larger carrier.
    • Others plan to push through the cycle based on the foundation of awarded/planned freight and cash reserves from the past up-cycle.
    • Selling tractors and trailers to leave the industry is another option for these carriers, which effectively reduces market capacity. (This process tends to cascade with the oldest assets in the market being permanently removed from the market as scrapped equipment.)
  • Fleet operators tend to have a portfolio of contract and spot volumes—contract award volume patterns are key to capacity strategies.
    • Many are replacing assets that aged during 2021 and 2022.
    • They continue to take on drivers as employees and/or independent contractors.
    • Growing fleet size is based on freight shifting from spot to contract awards.
    • They are holding off on fleet expansion if award volumes stall or contract.

As spot market pricing edges toward the estimated cost to operate a truck, the carrier market tends to slow investment. Owner-operators struggle financially since they drive more empty miles between loads, experiencing fewer revenue generating miles at lower pricing .This often leads to one of the three decisions above.

The response of fleet owners is shaped by the attributes of their business. As awarded volumes are under tendered, they too make investment decisions that halt capacity expansion and possibly cause contraction.

Watch for patterns in the decline in used truck pricing, net carrier operating authority figures, and trucking labor. Remember, trucking labor continued to expand in Q4 2022, suggesting ongoing labor is shifting from the smallest carriers to the fleet carriers. These are some indicators of the market's response to oversupply. These shifts in supply help better align with freight volumes and put upward pressure on spot market pricing.

National LTR averages

The spot market for dry van truckload is in the early weeks of the annual cycle as capacity returns from year-end and religious holidays. Load to truck ratios (LTR) tend to spike at year end and settle in January against a full seated trucking market and a traditionally lower freight volume month.

The first set of figures below shows the current truckload spot market LTR with the five-year averages. Of late, today's market is trending below the five-year average, which is one indicator that suggests the market is oversupplied.

Dry van LTR

Dry van is the largest segment of the truck market. It is performing strongest against the five-year average in most markets across the country.

Last year ended in historical pattern and the C.H. Robinson forecast estimates an increase in LTR and cost per mile (CPM). The final weeks of 2022 and week one of 2023 are influenced by driver vacations and, in most years, some additional year-end volume.

The result is active capacity that’s effectively reduced due to vacations. It often takes until week two of the year to see the active fleet fully returned from holidays and LTR and CPM decline.

Shown here is the nationwide U.S. DAT LTR for dry van spot market for the years of 2018 through 2022 and the first two weeks of 2023 plotted in red. Week 1 LTR and the 5-year average were both 5.6:1. The weeks of January and into February are likely to settle into the 3:1 to 4:1 range as a national average.

Dry Van load to truck ratio 5 year comparison

Refrigerated van LTR

Refrigerated truckload followed a similar year-end pattern to dry van. The second half of 2022 was a softer temperature controlled market. Seasonal and regional tension experiences were associated with fresh produce, holiday frozen goods, and protection from freezing goods. The first two weeks of 2023 are running five and six points below the five-year average and are expected to pattern similarly throughout January.

refrigerated load to truck 5 year comparison

Flatbed LTR

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..

flatbed load to truck ratio 5 year comparison

Regional LTR averages

National averages are helpful for aggregate perspectives of the market. But trucking is a very regional business. Week one of January displayed a notable experience of this regional variation. Shown below is week two, January 8–14, 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, while 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. Our 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.

Regional dry van LTR

Dry van continues to display a yellow (3.4 to 6.9:1 LTR) broadly from Eastern Texas up through the Midwest with a national average of 4.3:1 against a 5-year average of 4.1.

Dry van spot market heatmap DAT - C.H. Robinson freight market insights 11.17.22

Regional refrigerated LTR

Temperature controlled needs in the center of the United States are influenced by colder weather at this time of year. As displayed on the map in the warmer colors, items that need protection from freezing benefit from the insulated trailers.

Reefer spot market heatmap DAT - C.H. Robinson freight market insights 11.17.22

Regional flatbed LTR

Today's flatbed spot market LTR shows some regional tension in Louisiana, Alabama, and Mississippi. Broadly, the flatbed market offers plentiful capacity for spot and contract services nationwide.

Flatbed heatmap DAT - C.H. Robinson freight market insights 11.17.22

Contract truckload environment

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.

Route guide performance

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 January 8–14, and also reflect on RGD from the month of December 2022.

RGD by U.S. region

The regional view continued to show the Northeast displaying the most challenging RGD, while also offering the greatest improvement. The December national average RGD increased by 4% month over month (M/M) but was much improved Y/Y with a 30% reduction in RGD.

The Northeast pattern continues with the highest RGD of 1.28 against the national average of 1.19 for the week of January 8–14, offering the greatest variability in RGD in the fourth quarter.

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.

Routing guide line graph - TMC + C.H. Robinson freight insights 11.17.22

The chart above from TMC, a division of C.H. Robinson, reflects weekly RGD regionally across the United States through the week of January 8–14.

December FTA for North America drops a point to 87%

This FTA is much improved from the lowest reading during the pandemic of 79% but does reflect the normal pressure of December over November by dropping one point.

December RGD across distance bands

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..

Loads with length of haul under 400 miles continue to show higher FTA and lower RGD than other distance bands. Carriers are accepting all distance bands much more readily with a recent correction as seen in the image above.

For December, long-haul distance bands and the Northeast region were responsible for the 1% point loss in FTA.:

  • Short haul (less than 400 miles) posted an improvement in RGD of 1% from November and 21% improvement Y/Y—about 1.1.
  • Middle distance (400–600 miles) improved 1% from November at ~1.18. This is 21% improved from November last year.
  • Long distance (over 600 miles) RGD eroded 4% from November to 1.20 and is the fourth highest RGD for December in the last five years but improved 3% Y/Y.

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

Our latest dry van spot market cost per mile forecast is updated with the typical, year-end reduction of active capacity due to the holidays. Freight volume expectations from the three primary segments of retail, housing and manufacturing are broadly expected to produce single digit percent reduction year over year in freight volumes.

FTR Transportation Intelligence offers freight volume forecasts at the truckload sub mode level with dry van forecasted at a 1.3% increase in loadings for 2023 and refrigerated at 1.7%. Other sectors are mixed up and down in their January 2023 trucking update.

Other analysts offer an aggregate of blended volume modal forecasts that are single digit lower Y/Y. The latest release of the C.H. Robinson 2023 truckload dry van spot market forecast shows the end of year LTR a bit stronger than originally forecasted and latter half of 2023 holding closer to the estimated cost to operate a truck. The year end 2023 CPM forecast is similar to earlier releases

The anticipated Lunar New Year extension starting in late January and lasting for roughly three weeks in response to the slower economic conditions will likely result in a decline in ocean imports to North America with a suspected snap back in April and onwards.

2023 cost per mile forecast

Shown below is the C.H. Robinson 2022 and 2023 truckload dry van spot market cost per mile forecast without fuel. 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 to carrier without fuel.
  • The dark blue dotted line is the C.H. Robinson forecast for 2022.
  • The light blue dotted line is the C.H. Robinson forecast for 2023.
  • The forecast is 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.

Average cost per mile change Y/Y for the dry van spot market:

  • 2023 vs. 2022 C.H. Robinson forecast suggests a 16% decline in average cost per mile.

When viewing the 2023 decline in average cost per mile, consider that 2023 faces a 2022 comparable inflated by the Omicron COVID-19 wave seen in Q1 2022, which effectively decreased the active fleet due to illness, creating capacity scarcity, and driving up costs. Costs settled back quickly as drivers returned from illness and capacity aligned with decelerating freight volumes.

For 2023, the C.H. Robinson forecast shows normal seasonal downward movement of cost per mile in January and bottoms out at the estimated cost per mile to operate a truck.

Macro freight forces of interest in 2023:
  • Consumer demand may continue to soften through the first half of 2023.
  • Truck to rail interplay opportunity exists, but softer freight volumes could limit drift of freight volumes.
  • Inventory levels are expected to be worked down, creating some freight in the first half of the year and new orders in the second..
  • Industrials softened.

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.

Spot market forecast - C.H. Robinson freight market insights Nov. 2022

DAT National dry van linehaul cost per mile is the broker to carrier cost, which excludes fuel surcharge. The C.H. Robinson forecast is an extension of that cost.

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 operate per mile based on a host of variables with a key variable being the amount of empty (non-revenue generating) miles the carrier experiences.

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 pricing: Short-term energy outlook

In its January 10th Short-Term Energy Outlook, the EIA reported on-highway diesel fuel prices in the U.S. were $4.61/gallon on January 15, $0.92 higher than one year ago and down 0.1% from the previous week. The report also forecasted:

  • Brent crude oil price will average $83 per barrel (b) in 2023, down 18% from 2022, and will continue to fall to $78/b in 2024 as global oil inventories build, putting downward pressure on crude oil prices.
  • Retail diesel prices will average about $4.20/gal in 2023, down 16% from 2022. In 2024, EIA expects prices to continue to fall, and average near $3.70/gal. For perspective, retail diesel on January 18, 2021, was $2.696/gal..
Defining the days of supply insight

The "days of supply" figure provides an estimate should the U.S. not produce or import total distillate. Since the U.S. continues to produce and import, this figure is helpful to appreciate the inventory level, but it does not imply the USA will run short as was the concern presented in the news when the inventory hit 25 days in Q4, which was at the lower end of historical patterns.

The image below shows the historical days of supply and the improvement in December and January.

The most current statistic showing the week of January 1–6, 2023, was at 32.4 days. Visit the EIA website for the most current inventory level.


Weekly U.S. days of supply of total distillate
Diesel supply insights - C.H. Robinson Freight Market update Nov. 2022

Voice of the carrier from C.H. Robinson

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.

Carrier market insights

  • Spot market is largely unprofitable with fleet carriers working to avoid it where possible.
  • Impact of contract pricing is present, but much less than the spot market.
  • Most carriers report the struggles that constrained fleet growth in 2022 is now a good thing.
  • Focus on regional and short haul with disciplined attention to high yield from their networks.
  • Service metrics are again a priority with shippers.
Equipment

  • Tractor and trailer availability is much improved over early to mid-2022.
  • Costs for equipment remains high and has limited fleet expansion.
    • Asset purchases only where absolutely necessary.
    • High-cost equipment continues to strain profitability.
  • Parts availability and high costs of maintenance and repairs remains a challenge.
Trucking labor:

  • Most trucks are seated, and carriers can be more selective in the hiring process supported by owner-operator applications.
  • Driver pay has stabilized at the higher levels, but is no longer supported by higher market rates, challenging profitability.
  • Carriers continue to pay at 2022 levels to retain drivers.
  • Starting to hear of owner-operators leaving the industry instead of driving for another carrier.

Temperature controlled shipping

The temperature controlled marketplace has experienced weaker than historical demand in the first couple weeks of 2023. Inflation and winter weather impacts have been attributed to some of the shortfall of refrigerated freight needs.

These winter weather events have disrupted regional freight flows enough that the latter part of January and into February will likely return to more historical levels of market tension as freight flows correct.

Inflation tends to impact spending on produce and other fresh refrigerated products, lessening refrigerated trucking demand as consumers shift to canned goods and frozen. Frozen foods help maintain some of the shifted demand from fresh while the vegetable and fruit freight volumes are down. Based on the strong relationships C.H. Robinson has with global growers, expect minimal effects to early produce crops from the south.

Protect from freezing service is needed for many commodities (especially beverages) during the winter months, with the greatest demand from eastern Texas, north up through the Midwest and the Great Lakes regions.

Temperature controlled consolidation volumes are rapidly expanding in the wake of a slowing economy as shippers shift from partial loads to truckload consolidation, which provides similar service to truckload and is more cost effective that partially full truckloads.

Flatbed

Of the three primary truckload services (van, refrigerated, and flatbed), flatbed is demonstrating the greatest capacity opportunity with the spot market LTR level patterning below five-year averages.

Industry insights

While overall flatbed volume is forecasted to be down in 2023 1.5% to 2% Y/Y, industries contribute to flatbed freight differently and today's volumes in aggregate are reasonable Y/Y.

  • Volume expansion
    • Energy (oil, gas, and wind) is experiencing some growth in volume
    • Manufacturing is currently about flat Y/Y
    • Construction is off Y/Y
    • Retail (spring seasonals) is down Y/Y
    Flatbed capacity

    The flatbed market is skewed to the smallest carriers and owner-operators to a greater extent than the broader truckload or van market. With broader volume patterns against available capacity, there is concern capacity contraction will occur faster in flatbed than the broader market.

    Spring season

    The spring seasonal freight is lagging its annual start. As it unfolds. it will bring products such as fertilizer, soil, and mulch to garden centers, home improvement, and bigger box retailers.

Cross-border shipping: Canada

The following cross-border transportation insights regarding the balance between north and southbound trucking and intermodal insights valuable to planning.

Canada trucking insights
  • Similar to intra-U.S. freight, the holiday season had a similar impact on freight with driver vacations effectively reducing the active fleet and temporarily impacting capacity and pricing.
  • January follows the broader North American pattern with historically lower freight volumes than the balance of the year for both intra-Canada and cross-border shipments.
  • Southbound spot market load volumes have fallen behind northbound volumes, creating an imbalance that may start to show in pricing as carriers seek to recover empty mile costs.
  • The electronic logging device (ELD) mandate went into effect January 1, 2023. Individual provinces are taking different approaches to implementing penalties and applying the new mandate. The chart below from https://www.trucknews.com/ outlines the variety of approaches by province. The Canadian trucking alliance (CTA) encourages supply chain professionals to review and consider the impact of hours of service compliance on routes and shipments.
  • Carbon Tax in Canada: The Canada government is set to put the new carbon taxes into effect in April 2023 and gradually increase over the next 7 years into 2030. With a direct effect on costs of operation, this will impact freight rates, but to what extent will depend on freight availability per time.
market cycle over supplied
 
Canadian intermodal insights
  • The Canadian Pacific Railroad (CP) has suspended charging fees for guaranteed equipment as the freight market tension settled.
  • Cross-border use of EMHU containers is now only via the Canadian National Railroad (CN). CP has suspended use of those containers in favor of their private fleet of ~1,200 CPPU containers that run from Canada to Chicago. C.H. Robinson has available capacity for customers.
  • Winter season means temperature controlled units must also be used to protect products from freezing. These services tend to require 24–48 hours of lead time.
  • Train lengths will be shortened when temperatures near 25 degrees below zero Celsius. This can affect capacity and service. Shorter train lengths help with breaking in very cold weather.
  • Terminal and local trucking operations have been and will continue to be impacted due to heavy snow falls. C.H. Robinson constantly monitors these situations, communicates with customers, and works to minimize the impact of weather events.
  • Volumes on the Canadian rail network are expected to remain strong in 2023.

Cross-border shipping: Mexico

Automotive insights for cross-border transportation

Cross-border trade for the automotive industry continues to present opportunities for both industry suppliers and transportation providers. To capitalize on cross-border automotive freight flows, U.S.-based carriers are expanding fleets.

Mexico is one of the largest exporters of automotive products to and from Monterrey, Saltillo, and the Bajío region, among others. As a result of this continued opportunity, be mindful of the ongoing evolution of services around exchanges with U.S. and Canada equipment.

In the post-pandemic environment, freight volumes are returning, and the market is increasingly seeking direct or dedicated services over crossdock or transload border services. Automotive businesses are encouraged to look into both transload and direct services as they offer attractive services with increasing levels of available capacity.

Intra-Mexico trucking

Central and southern Mexico, namely the Zacatecas state and the states on the Pacific coast, continue to be areas with low availability of capacity. These sectors also have a greater tendency for theft. Equipment is more difficult to come by as carriers limit their activity in these markets. Any capacity that is available tends to be at higher than expected prices per mile due to the security concerns and costs from loss and damage. Plan for increases, especially on rates that have aged.

female produce manager stocking fruit on shelf
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Intermodal Shipping

TOP STORY: Capacity and pricing help set a full load strategy for the next upcycle

The rail sector has seen a lot of changes over the past year with leadership changes at the CEO level for the CSX, CN, and NS. The CP and KCS merger continues under regulatory review and the labor negotiations were finally settled, averting a strike. Now in the early weeks of 2023 amid freight volume headwinds and lower truck pricing, the railroads are working to address lagging service and capacity issues.

Domestic intermodal summary
  • Most domestic container and dray capacity issues have abated.
  • Train speeds continue to improve.
  • With headcount down roughly 30% since 2015 (peak year), staffing is seen as key to improving service. (Source: STB, Rail company reports)
  • Multi-year volume and pricing agreements are of interest by the railroads and will garner the best pricing on volumes converted from truckload.
  • Carbon emission reduction strategies continue to surface as a priority and influencing full load strategies between truck and intermodal.
Import and inland intermodal transportation

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. Here is a look at top influencers impacting imports.

Congestion issues are primarily found at the ports of Savannah and Houston.

  • Vessel berthing delays persist during the first week of January
    • Savannah: 7-10 vessels
    • Houston: 7-8
  • We continue to see improvements at ocean ports & rail as demand continues to fall & congestion improves.
  • Empty equipment continues to pile up at these and other major ports. As the demand slows down, the # of empties causing congestion @ terminals continues to improve.
  • Chassis shortages associated with full warehouses and ongoing labor shortages for warehouse/cross dock to continue into Q1.
  • Chassis availability at inland markets such as Memphis, Chicago, and across the Ohio Valley remain challenging at this point into the new year. Industry participants are requesting equipment maintenance and repositioning by chassis providers to improve overall constraint on drivers.

Canadian ports and rail terminals on the West Coast:

  • Equipment shortages including rail cars and drivers are creating long dwell experiences.
  • Inland disruption as a result at Montreal and Toronto persist as a result of the port challenges.
  • Vancouver terminals continue to be congested, however, in the next 4-6 weeks improvements are expected from volume standpoint as Lunar New Year than kuouwill start 3rd week in Jan. & carriers will look to cut back capacity for weeks to come.
West Coast labor negotiations

Negotiations continue and no material updates are currently available. The industry continues to have optimism about negotiations.

Less Than Truckload (LTL) Shipping

TOP STORY: Carrier pricing discipline expected for 2023

The LTL industry may face a second year of low single digit contraction of freight volumes Y/Y. This is on the heels of a decade of volume growth and terminal capacity contraction. As such, LTL carriers continue to be presented with balance to tension across their networks.

Some lanes will offer shippers more opportunity than others as they strive to minimize the impact of pricing increases. Carriers have come to market with general rate increases and then conduct disciplined negotiations based on the attributes of freight and network needs.

Accurate bills of lading

Carriers are pursuing all applicable charges from overdimensional and extra length fees to costs shippers may find "after the fact. surprises" LTL carriers are taking the information provided on the bill of lading (BOL) and comparing it to the findings of the on-site dimensionalizer. Cost adjustments are most often related to these three items:

  • weight
  • dimensions
  • class

In addition to the freight characteristics, incorrect "Bill To" information is a leading reason for increased charges.

"Bill to" situations most frequently arise when customers use their own BOL and denote the incorrect billing information. The new eBOL environment is something that can help solve invoicing challenges. Discuss eBOL services with your provider as a way to virtually eliminate incorrect bill to information.

Small Parcel

The true cost of parcel in 2023 is more than just GRIs

As expected, entering a new year means rate increases with FedEx and UPS. The anticipated increase for 2023 is 6.9%.

The general rate increase (GRI) is just one of the factors that will contribute to increased spend for shippers this year. Outside of GRIs, accessorial fees like additional handling will increase as well based off the rate increase.

According to Parcel Magazine:

  • “In 2023, the average UPS customer will pay 10.2% more, and the average FedEx customer will pay 9.1% more compared to 2022.” This percentage includes the GRI, along with more costly additional handling and oversize fees.
  • “Only 3.3% percent of shippers will see their costs with either FedEx or UPS increase by 6.9% or less” These are likely lower volume shippers that ship small packages and don’t get additional handling and oversize fees often.
Shipment size matters

The size and shape of your parcels means everything in the parcel world. Understanding the limitations of parcel shipping along with how dimensional rating, additional handling, and oversize fees apply to your shipments will help you make informed decisions on the most cost-efficient method to ship.

Keep these important factors in parcel shipping top of mind:

  • Dimensional rating
    When shipping a product, consider both the actual weight and the dimensional weight. The carrier is going to bill/apply additional fees based on whichever is the higher of the two.
  • Additional handling fees
    Parcel carriers may apply additional handling fees based on three shipment factors: weight, dimensions, and packaging. Additional handling fees are usually charged when a shipment surpasses a specific weight, length/width, or uses unusual packaging. These vary by carrier, but the specific fees, along with the criteria for them, can be found in each carrier’s 2023 service guide.
  • Oversize
    If a product exceeds a specific height and weight, an oversize fee will be charged. These vary by carrier, but the specific fees, along with the criteria, for them can be found in each carrier’s 2023 service guide.
  • Overmax/unauthorized package
    Even larger packages may be hit with an overmax/unauthorized fee, which is over $1,000. These packages really shouldn’t be sent via parcel unless absolutely necessary.
Plan ahead for parcel in 2023

Your parcel strategy starts with industry knowledge and how these increased prices affect you as a shipper. Consider the following before moving forward:

  • Confirm the physical products you are shipping are still profitable to ship via parcel This is especially needed if you ship larger packages. Consider evaluating the cost of continuing to ship via parcel versus other modes.
  • Be mindful of the packaging you are using
  • Shipping in larger than necessary or non-typical packaging can result in additional handling/oversize fees.
  • Work with parcel experts
  • Use their parcel experience to help make the most informed decisions on how to ship parcel cost-efficiently while avoiding unnecessary fees.

Government and Regulations

TOP STORY: The latest on independent contractor status for drivers

In June 2022, the Supreme Court denied an appeal by the California Trucking Association to continue the stay on the California AB-5 law impacting the independent contractor status of certain truck drivers

While many California-based trucking companies re-examined their business models, the broader industry began to speculate if similar laws would spread to other states and potentially nationwide.

Recent Department of Labor (DOL) proposed rule changes around independent contractor status garnered comments from a number of trucking associations, including OOIDA.

It is important to note that the recent DOL proposed changes are different from the California AB-5 law. Any federal rulemaking process takes time. It is likely this topic will not impact the industry in 2023 or 2024.

C.H. Robinson continues to believe any changes regarding independent contractor laws may impact how shippers access carrier capacity but will have little impact on the overall amount of capacity available.

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