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Cautious Optimism: A Look Ahead For The Trucking Industry In 2024

By Ken Miller, President of StateWay Logistics, January 18th 2024

The trucking industry faces ongoing challenges as it prepares for a challenging winter. The sector is experiencing significant pressure due to continuous capacity expansion, resulting in a formidable for-hire market. Despite the clear need to cease further expansion, the industry appears to be neglecting this crucial principle. This situation is compounded by declining pent-up capital spending and low freight rates, which are contributing to a notable increase in the revocation of operating authorities. Consequently, a shift in this trend is anticipated in the coming year.

Despite a few indications of recovery, overall freight volumes remain subdued, contributing to a loose spot market. Even amidst a strong economy, spot market dynamics continue to be soft, influenced by owner-operators maximizing their mileage and ongoing equipment additions by private fleets. As the industry moves towards rebalancing capacity and a potential recovery in freight volumes throughout 2024, the dynamics of the spot market are expected to shift. However, this transition is likely to be preceded by several more months of challenging conditions.

Improved consumer purchasing power, driven by significant disinflation and steady wage growth, is fueling positive retail sales trends, which, in turn, will propel the inventory cycle forward. As the industry adjusts to a more appropriate size, the tightening of capacity should eventually lead to an increase in truckload spot rates. Early indications of improved cyclical demand in 2024 are evident in the growth of container imports and intermodal volumes, with global ocean constraints at the Panama Canal and the Suez Canal redirecting freight towards west coast ports.

The future of the trucking industry is subject to various factors. While the robust performance of the economy in 2023 may offer less support for freight in 2024, a contraction in supply is expected to drive the industry forward, even in the face of a potential broader economic slowdown.

Regarding the trucking demand forecast, there are early signs of improvement in cyclical dynamics, albeit from a low starting point. With an increase in goods demand and positive inventory fundamentals (loaded imports up by 31% at LA and Long Beach ports), a gradual improvement is anticipated to persist.

The US Class 8 tractor backlog remains at just under six months, marking a 38% decrease in unit terms compared to a year ago. Consequently, the anticipation is that reduced demand will lead to a shift from current equipment supply additions to reductions by Q2’24. Additionally, a return to demand growth is expected in Q2’24, which should drive an upward trend in spot rates.

In terms of trucking rates in 2024, further declines in driver availability, akin to those experienced in October, are likely to support continued improvement in the rate cycle. The gradual recovery of volumes and a decrease in capacity are positive indicators for rates, although spot rates are currently lingering near their lowest levels.

This analysis provides insights into the potential trajectory of the trucking industry in 2024. If you have any further requests or need additional information, feel free to let me know!

About the Author:

Ken Miller is a highly accomplished professional with a wealth of experience in the logistics industry. He currently holds the position of President & Managing Director at StateWay Logistics, a comprehensive logistics firm that covers all transportation modes. In addition, he also leads Dray Solutions, a software solutions company that specializes in providing advanced technology to third-party logistics companies and carriers.

About StateWay Logistics:
 
StateWay Logistics is changing the way that shippers think about their 3PL relationships by driving service excellence into the three most critical areas for most supply chains: international ocean and air freight, domestic intermodal and LTL shipping, and drayage services.
 
For further information visit statewaylogistics.com
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