Freight Market Update: May 2024

Some of the industries that have a strong impact on freight demand include food and beverage, housing, and automotive. Food and beverage accounts for approximately 10-15% of all for-hire trucking freight. This encompasses shipping to retailers/grocery stores as well as delivering to restaurants. U.S. consumers have seen a change in purchasing behavior in the past decade, with spending at food and beverage places outpacing spending at stores, meaning more money is being spent going out to eat and drink. The post-pandemic environment has helped this trend, but it has been occurring for years before then. In fact, spending at places has doubled in the past 10 years, while it has taken nearly twice that long for in-store spending to double. With most consumers being able to stretch their dollar further when buying groceries rather than eating out, this continued trend to favor dining out over grocery shopping means that this could be contributing to the softer freight market. The automotive industry also contributes heavily to freight demand. The average vehicle is comprised of approximately 30,000 different parts. With various different providers specializing in each of these components, it makes for a highly fragmented marketplace requiring many shipments to acquire all parts needed. The housing industry is similar, requiring a variety of parts from lumber to screws, to appliances and often furniture, which all have their own sets of parts. This all generates a large amount of shipping needs.

On the other hand, some of the GDP components that don’t correlate as well with freight demand include government spending, services, and imports. Government consumption expenditure and gross investment is a broad category that includes spending on services such as national defense and public-school education. While this does include some things that may contribute to for-hire trucking demand, like highway construction, there isn’t much of a correlation between this category and truck volume. Services is another category that doesn’t contribute much, and may in fact result in a decrease in freight demand. Using our babysitting example, if you are spending money on a babysitter, this will decrease your disposable income, meaning that you may not have sufficient funds to purchase a physical good that you would have if you didn’t need childcare. Between these two categories, services and government spending account for 63% of the GDP for this past quarter. Imports are a bit different than these other two groups because imports actually count against GDP, since the calculation used is exports minus imports. So, the more imports, the smaller the resulting GDP figure, but imports contribute to freight demand.

The U.S. Real GDP (which is essentially GDP that is adjusted for inflation) increased at an annual rate of 1.6% in the first quarter of 2024, compared to the consensus estimate of 2.5%, but as illustrated above this number on the surface cannot be taken directly as a means to indicate a softening truck market. To further illustrate, as of Q4 of 2023 the Truck Tonnage Index was down approximately 3% since Q3 2022, while the U.S. Real GDP was up nearly 4% within that same timeframe. In 2005-2007, a similar scenario unfolded where these two measures trended in the opposite direction for 7 consecutive quarters. All of this together indicates that the overall GDP growth exhibited doesn’t necessarily translate directly to trucking volumes, but requires a deeper analysis to determine what the true contributions are.

This helped me

U.S. Spot Market Forecast

Our 2024 dry van linehaul cost forecast remains the same at -2% change y/y. As expected for the start of produce season, we have begun to see an increase in temperature-controlled freight rates first. We still expect rate increases through May for both equipment types despite remaining in a state of over-supply within the market. We have recently seen a slowing of carrier exits from the marketplace as some carriers are optimistic of volume and spot market rate increases through this seasonal period. With spot rates still below the estimated breakeven cost of hire, and likely to continue into June, a loose environment still remains. Keep in mind that our forecast is at the nationwide level, so there will be regional variances due to produce season.

We are excited to share an extended forecast this month which reaches beyond the 2024 calendar year for both dry van and refrigerated van. Now we offer our projections for the first several months of 2025. The year starts off with the easing of rates from their end of year, holiday peak. We expect that rates will decrease for a few months; however, we do not currently expect rates to reach the lows that were experienced in 2023 or 2024 during this timeframe.

Our 2024 refrigerated linehaul forecast similarly remains unchanged from last month. The 2024 temperature-controlled forecast is at -1% y/y.

C.H. Robinson has two customer communities, shipper customers and carrier customers. What follows are aggregated insights from conversations with carriers of all sizes to offer perspective into their top concerns over the past month.

Market insights 

• Pricing continues to be at the trough, with no further room to move down, and little movement upwards 
• Small to mid-sized dry van carriers are considering diversifying their portfolio of trailers and expanding into flatbed, temperature-controlled, etc. 

Equipment  

• Used equipment pricing has decreased to a point where some carriers are avoiding buying new equipment and buying cheap, used equipment instead 
• Carriers looking to sell equipment are trying to hold onto them a bit longer, as equipment prices are so low 

Drivers 

• Driver’s time at home continues to be a large area of focus in regard to driver retention
• Despite the market softness, carriers are still trying to retain their strong drivers as they know that hiring will be difficult when the market turns 

A key value proposition of C.H. Robinson to our contract carriers is aggregating lane volume and demand pattern variability from our vast shipper network. This provides our carriers with more predictable volume from C.H. Robinson, and as a result, they are interested in and able to offer consistent capacity and market pricing with high performance.  Engage your account teams for more information on how to leverage our scale. 

Produce season has officially begun in the southernmost states, as Mexico continues to see increased volumes. While non-produce impacted origins remain soft, Southern California, the Southwest, and the Southeast have seen the largest tightening in capacity. To combat this, work with your account team to provide visibility to supply chain needs so they can build the proper lead time and flexibility into the loads. For more details on geographies and locations, please reference the map within our last month’s report.

East Coast – The Northeast remains soft, even with shorter than average lead time. Southeast produce season has begun in addition to Miami being the Mother’s Day floral hub that drives the holiday. Capacity is being drawn into these origin points in the Southeast and we expect that to continue through May and into June.

Central U.S. – Capacity markets through the Mid-North and Mid-South regions remained soft through April. Produce volumes out of TX may be impactful in May, especially surrounding Memorial Day.

West Coast – Pacific Northwest outbound remains soft, but heading into that region has felt some tightness due to the imbalance of freight especially when originating in the Southwest. We are beginning to feel the seasonal market impact from CA, especially for long-haul freight, as demand increases and begins to strain available capacity.

Work with your C.H. Robinson team to stay informed on regionalized opportunities and how to best schedule freight to capitalize on the best price and service.

As the weather gets nicer and days get longer, flatbed demand tends to increase. This is due to ideal conditions for construction. We have been seeing this demand over the past several weeks, especially within the South and Southeast. During this Spring and into May, supply has remained strong. Large fleets are trying to minimize deadhead for returns as contract lane volumes pickup. This means positioning equipment into busier markets and capitalizing on seasonal demand spikes. Small and medium-sized carriers continue to give us feedback that they can position trucks to where there is consistent demand with sufficient lead time. A few extreme weather events have created some pockets of high demand, but this remains reasonably tempered given this time of year. During periods and geographies of nicer weather, customers have benefited from eliminating the requirements for tarping. Taking advantage of the climate allows for the reduction of both costs to tarp, but also total time to ship as carriers can spend more time driving. If you are looking for cost/time savings and ship out of regions with favorable weather conditions, this could be an option for you. Check with your account manager for more details.

A good amount of heavy equipment comes through the port of Baltimore and moves in the U.S. on flatbeds. As such, the unfortunate collapse of the Baltimore bridge has impacted the flatbed market out of Baltimore much more significantly than the other equipment types. We have seen some customers rerouting cargo to other ports and have offered successful support minimizing disruptions in deliveries. Collaborate with your C.H. Robinson team to set yourself up for success.

This helped me

The LTL space has seen a variety of disruptions in what has historically been considered a more stable market. During this period of rebalancing of carrier supply, adoption of new technologies, and global supply chain issues it can be easy to lose sight of some simple methods that generally will help either make your freight more attractive to carriers or just set proper expectations. Here are five things to consider:

Diversify your carrier portfolio:  Carriers are largely presented with more freight than they can manage in today’s market. With Yellow’s terminals still largely out of the picture, LTL carriers are discerning the best ways to enhance their yield management strategies (mix of freight driving the highest performance of profit and service to shippers. This leaves carriers sending pricing signals of the lanes, commodities, origins, and destinations that optimize networks, encouraging shippers to work with C.H. Robinson to create a multi-carrier strategy where freight lanes are aligned with carriers' priorities.

Create a pick schedule that carrier’s value: Like truckload, dwell matters. For LTL’s, the ability to get multiple picks and drops out in a day is key to service and yield. Locations that offer variability in dwell or long dwell are being deprioritized or even removed from locations of interest. Carriers are continuously looking for efficiency improvements, offering an ideal pickup schedule is a cost-effective way for them to do so.

Be accurate on tender details:  Key to incorrect tender details is the real execution disruption. Where a misrepresentation occurs, planned multi-pick trailer optimization plans fail and subsequent shipper picks may not be able to be made. Where this is a persistent problem, carriers will deprioritize these shipper locations. Utilizing eBOL will help mitigate these errors while also providing further benefits to carriers.

Add time to the carriers published LTL transit times:  With a much smaller capacity pool, transit times can have more variability than pre-Yellow or even pre-Covid. Simply put, there is more freight than capacity and shipments at times need to wait for the next day for inter-terminal and final delivery capacity. This will be exacerbated once tonnage increases.

Understand how your freight mix fits with market conditions:  C.H. Robinson is ready to work with clients on optimizing LTL freight for today’s market. This collaboration between our freight experts and clients looks at carrier options and modal options such as consolidation, multi-stop truckload, intermodal and parcel.  We help our clients find the mode and carriers where their freight is treated best.

To learn more about how C.H. Robinson can help you improve within each of these areas, contact your account team. 

This helped me

2024 has started with strong volume growth for the North American intermodal market. Through March the market has shown an 11% Y/Y growth. That volume growth is not equal, as the international market is showing an 18% Y/Y growth, while the domestic side has only shown growth of 0.9% Y/Y. We have spoken to clients about this dichotomy, and they have pointed to lackluster domestic sales. At the same time, their imports have been shifting back to the West Coast, leading to modal shifts but not overall sales growth. The Panama and Suez Canal disruptions continue. Baltimore is just 2% of container imports, but the bridge collapse may be reinforcing more east to west shifts. Intermodal capacity remains available while pricing remains competitive given the state of market supply. Intermodal pricing is currently very advantageous to shippers, right now is the time to lock in your rates for the year before the markets tighten in the coming months.

While volumes rise across the nation, there are no capacity-constrained domestic container markets. Drayage and rail capacity is still abundant. As the rails and drayage providers see the volumes grow, the deep discounts we have been seeing are tempering.

On May 1st, 9,300 CN and CPKC workers voted to authorize a strike. This could potentially stop operations on both railroads in Canada. On May 13th, the Canada Industrial Relations Board (CIRB) announced they would be delaying any strike action while it reviewed the potential health and safety implications of a rail shut down. This is expected to take a few weeks. During this time, the CN an CP continue to seek a negotiated resolution with the respective unions. If a strike were to be approved there would be a 10-day notice to allow for the safe closure of the rails. We are in close contact with the rails and will pass on any updates as they occur.

Intermodal spot rates are down 5% Y/Y. However, they continue to firm up, and we still expect them to turn positive by Q3. The forecast is for intermodal spot rates to finish the year up 0.6% excluding fuel. The trend will continue into 2025 with a forecasted increase of 3.4% for that year as the IMDL market follows the strengthening truck rates.

The railroads continue to look for unique solutions to get more containers on their networks. Lock in your rates for 2024 or risk a rate increase in the second half of 2024.

Rail transits continue to perform near the five-year average on time to plan. Despite a slight drop in average speed in March the rails are optimistic service levels will stay high. They are reporting an ample supply of both trains and crews. Additionally, expedited service options provide savings with similar speeds to over the road in many lanes.

There are a couple of international situations that could lead to downstream delays that you should be aware of and potentially look into some contingency planning if applicable. Congestion at trans-shipment ports in Asia is evolving into a pressing issue. Shipments can be delayed as much as 10-14 days at many major trans-shipment ports, such as Busan and Singapore. This is mainly due to the increase in trans-shipment services caused by carriers choosing to omit port calls in an effort to re-establish schedule integrity and catch Panama Canal transit appointments. There have also been severe weather events in the past two weeks, specifically at China ports, which has added to the port congestion. Canadian National Railways (CN) and CPKC (Canadian Pacific Kansas City) workers have voted to strike, setting the stage for mass disruption. Talks continue, but if they break down May 22nd would be the earliest that strikes could begin.

• Atlanta – The NS AUSTELL Ramp has implemented a limit to the number of appointments for in and out gates, and it is unknown how many appointments they give per hour. Our truckers have reported lately that the soonest appointments have been 2-3 hours out, which is causing them to have to bring loads and empties to their yard to avoid rail detention charges.
• Appalachian Regional Port (ARP) – Truckers have been getting more requests for lanes picking up from the ARP as an alternative to the Atlanta rails, but this requires a significant increase in base pricing since there are not a lot of Atlanta based carriers in the ARP market.
• Norfolk – This market is still experiencing significant congestion caused by diversions from Baltimore, specifically the VIG Terminal. Be prepared in the upcoming weeks for carriers to increase their base rates and/or add per-container diversion fees for active shipments moving through Norfolk that were originally slated for Baltimore.

• NY/NJ –APM and PNCT terminals are behind the influx of containers diverted from Baltimore (carriers expect the PNCT terminal to be congested all week). Maher, GCT Bayonne and GCT New York terminals are operating as normal. Smaller carriers will be backed up as equipment may be in deficit, please work with Inland Product for any capacity needs.
• Baltimore – the Dali ship is still stuck underneath the massive bridge steel structure. Crews have removed 180+ containers and a lot of debris, and have initiated controlled explosions to remove bridge fragments that were resting on the vessel. According to Unified Command (which includes Coast Guard, Army Corps of Engineers, MD Department of the Environment, MD Transportation Authority, MD State Police, and representatives of the ship’s owners) their goal is to refloat the Dali and open the main 50-foot deep channel by the end of May.

• Chicago – Chassis supplies and capacity are both high. Calhoun Truck Lines is attempting to expand its DART program, essentially a container stacking program at CY’s, to the Chicago market. They have tested it in Minneapolis and have found their container dwell times cut in half. In preparation for volume increases this year, they are hoping to proactively set themselves up to manage higher volumes efficiently.
• Cincinnati – Volumes are flat over the previous quarter and previous year. Pool chassis are plentiful in the market. Rail dwells continue to be an issue despite the market softness, NS Gest is especially bad with 2-3 hour turn times during normal lift hours some days.
• Pittsburgh – Carriers are reporting that volumes are up, chassis and container equipment both remain limited. Short Lead times are hard to fulfill due to increased volumes.
• Louisville – In MN with ONE moving to Flexivan chassis, they brought in about 100-150 chassis and as a result TRAC is moving chassis out of market (which unfortunately is causing a shortage of pool chassis). MN BNSF is also grounding boxes with volumes staying steady and fewer chassis. For KC multiple carriers are reporting congestion and delays at the BN (Edgerton, KS ramp) - wait times exceeding 6 hours in many cases. Omaha market carriers are reporting a lot of containers in stacks at the rail ramps causing delays and congestion still. St. Louis is no longer an active market in C.H. Robinson’s direct chassis billing program as of March 13, 2024.
• Kansas City/ St. Louis – The MWCP gray chassis pool is closed as of May 1st. Motor carriers will turn to leveraging private chassis pools or privately owned equipment.

• Oakland – Reporting 5 vessels at berth, 2 vessels at anchorage with 8 more vessels to arrive in the next 48 hours. SSA Terminal is becoming challenging as carriers are having a hard time securing appointments and containers are sitting longer in closed areas which may cause delays.
• Port of Los Angeles – Container volumes are up from last week by 16.58% and up by 26.33% compared to 2023, although we should see a significant decrease in volumes through the end of May.
• Los Angeles-Long Beach – Rail container dwell of eastbound IPI freight is on the rise and being closely monitored as more IPI inbound cargo is arriving at these terminals. Current analysis shows that we are on the edge of rail car availability and congestion could appear through May should import bookings moving Eastbound via LA/LB continue to rise. Due to lack of advanced notice to the terminals and railroads about bookings at origin requiring IPI rail capacity, the terminals are preparing space and moving containers to accommodate what they expect to be increased demand, but keeping dwell of IPI containers within 4-5 days is key.
• Port of Portland – The port is shutting down their container shipping operations on October 1st 2024. Customers will have a choice of terminating their containers at the port of Seattle/Tacoma (SEA-TAC) and draying down to Portland or can chose to have them railed to PDX ramp and delivered locally. We have carrier coverage for both options.

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

This helped me

The Mexican GDP growth rate for the first quarter of 2024 came in at 0.2% sequential quarter over quarter growth in the first estimate released, 1.6% year over year. Production of vehicles increased 0.6% while the export of vehicles increased 11.3% y/y. The quarter’s growth was stifled a bit due to poor March numbers, but April more than picked up for that, increasing production 21.7% compared to April of 2023. Automotive continues to be a bright spot for Mexico, as it capitalizes on the nearshoring drive. Another bright spot is the strengthening peso relative to the U.S. dollar. The peso strengthened in March to an average of 16.8 pesos per dollar, compared to the prior two-month average of 17.1 pesos per dollar.

Economic activity in Mexico continues to reach record levels that support the expectations placed on nearshoring. Finished vehicle production and automotive exports also keep reaching all-time highs in Mexico; finished vehicle production grew 21.7% in April compared to the same period last year and exports grew in the same month 14.4% with most of that volume 90% approximately heading to the U.S. In general, the total value of Mexican exports to the U.S. reached record levels in Q1 of 2024, reaching almost 120 billion dollars. The Mexican GDP growth rate for the first quarter of 2024 came in at 0.2% sequential quarter over quarter growth in the first estimate released, 1.6% year over year. Production of vehicles increased 0.6% while the export of vehicles increased 11.3% y/y. The quarter’s growth was stifled a bit due to poor March numbers, but April more than picked up for that, increasing production 21.7% compared to April of 2023.

Automotive manufacturing has expanded to 10 states and continues to be a bright spot for Mexico, as it capitalizes on the nearshoring drive. 90% of Mexican automotive exports are shipped to the North American market so the fate of this industry has a heavy impact on transportation demand across the continent. The strengthening of the peso relative to the U.S. dollar is another factor influencing economic activity. When the peso strengthens, Mexican exports lose competitiveness, but Mexican imports become attractive. The peso strengthened in March to an average of 16.8 pesos per dollar, compared to the prior two-month average of 17.1 pesos per dollar. Nearshoring will continue to have a large impact on the Mexican economy. As of 2023, Mexico broke into the top 10 exporting countries worldwide, ranking ninth.

It is important to keep in mind that this growth doesn’t come without challenges. For example, the Texas Department of Public Safety recently performed enhanced safety inspections on all commercial operating vehicles (COVs) departing from the Ysleta port of entry commercial cargo facility at El Paso, Texas. These inspections had a significant impact on wait times and the flow of COVs entering the U.S. As northbound volumes increase, bottlenecks like this would lead to even longer wait times. It is important that your cross-border transportation strategy is flexible enough to manage disruptions of any kind, work with a provider that can offer flexible options that allow you to respond and pivot fast when this kind of disruption happens.

2023 truckload capacity stats for Mexico are out. The total number of carriers providing service grew 11% and the number of total truckload capacity grew 16%. And in the first quarter of 2024, new license plate grants grew 4% compared to the first quarter of last year. This growth reflects the current and future expectations of expansion from the Mexican economy and the continued and lasting impact from nearshoring.

The Mexican Government has also recently made some changes that impact transportation. They recently announced temporary tariffs of between 5% to 50% to 544 HS codes applied to goods from countries that do not have a trade agreement with Mexico. This measure will apply to products such as steel, aluminum, bamboo, rubber, chemicals, oils, soap, paper, cardboard, ceramic products, glass, electrical material, musical instruments, furniture, and more. This went into effect as of April 23, 2024, and is effective up to two years after its publication. The government has also made some improvements at the border. One of the common disruptors of cross-border trade, Mexican customs processes, recently experienced technological updates. It is estimated that 41 of the 50 customs offices have strengthened their technological capabilities to achieve a steady flow of goods maintaining a high level of supervision for customs authorities. From January to March 2024, 5.3M foreign trade operations were carried out at Mexican customs offices, of which 3.6M were carried out at the country's border customs, registering an increase of 4.8% compared to the same period in 2023. The customs offices of Nuevo Laredo, Tijuana and Ciudad Juárez are the three main border customs offices in the country, together they carried out 59.8% of the total border customs operations.

Talk to your C.H. Robinson representative and leverage our expertise built on 100 years of experience doing cross-border business.

Cross-border: U.S.—Canada

The Canada GDP growth rate for the first quarter of 2024 is expected to be around 3.5% sequentially. Inflation for groceries has decreased substantially in the past year, from 11.4% to start 2023 to 2.4% as of this February. While grocery prices remain higher than they were pre-pandemic, cooling inflation off the peak figure is good news for the food and beverage freight industry as it allows for a potential increase in demand. The S&P Global Canada Manufacturing PMI in April was 49.4, which is the 12th consecutive month of contraction (a reading under 50).

Each year, the Canadian government institutes a thaw period that reduces load limits on all public roads during a certain time. This timeframe is dependent on zoning, but the final two zones just recently finished their thaw period as of May 10th and 17th.

The workers from the two largest railroad companies, Canadian National Railways (CN) and CPKC (Canadian Pacific Kansas City), have voted to strike, setting the stage for mass disruption. Talks are ongoing to reach an agreement, but if they are unable to do so by May 22nd a strike could go into effect. We expect that many shippers will not want to risk waiting until the 22nd to find out if the strike will happen and will start converting from rail to truckload in the days leading up to the decision to prevent supply chain failure. There are also negotiations ongoing at both the ports of Montreal and British Columbia. All port operations at both of these ports remain fully functional, although until a deal is reached, the possibility of a strike remains. These situations are fluid and to be monitored closely for changes.

This helped me

On May 29th, FMCSA will conduct a public listening session regarding the ongoing re-design of their motor carrier and broker registration process and website. This is a public meeting that is open to any stakeholder who wants to help shape the new registration system that manages the registration life cycle of regulated entities. This is a virtual meeting, but spots are limited. You can register for this meeting here.

The Francis Scott Key Bridge clean-up continues and can be monitored on the official site. This website contains relevant press releases, allows for an opt-in to subscribe to incident updates, and contains an easy to interpret visual depicting the areas of cleanup surrounding the bridge and its associated progress. Related to this, FMCSA has extended some emergency declarations related to the bridge collapse until June 8, 2024. These declarations provide hours of service relief for loads providing relief goods for the bridge collapse and for loads rerouted due to the bridge collapse.

This helped me

Retail diesel's national USA average price per gallon of $4.00 in April is down from $4.02 in March, and still lower than the $4.10 average from April 2023.  As depicted in the visual below, created based on the data provided by the EIA, you can see that fuel has been decreasing in the back half of April and into May.  Despite the recent decrease of diesel rates after the momentary spike in early February, crude oil prices have continued to increase YTD. There are many factors that play into the cost of diesel, but crude oil prices are the largest, so there remains upside risk for diesel if oil prices remain elevated or increase any further.

This helped me