In the ever-changing world of logistics, freight rate fluctuations remain as unpredictable as ocean tides, with market directions often obscured like a fog-covered sea. For logistics managers navigating these waters, each day presents significant challenges and uncertainties. The ability to pierce through this fog and make informed decisions has become crucial for success.
The quarterly TD Cowen-AFS Freight Index serves as a lighthouse in this misty landscape, using data-driven analysis to illuminate the path forward. This comprehensive report examines three key freight sectors—truckload (TL), parcel shipping, and less-than-truckload (LTL)—revealing potential trends for Q1 2025 while analyzing the critical factors shaping these developments.
I. The TD Cowen-AFS Freight Index: Origins and Value of a Market Barometer
TD Cowen, a prominent New York-based investment firm, partnered with Louisiana-based third-party logistics provider AFS Logistics to launch the TD Cowen-AFS Freight Index in October 2021. This predictive pricing tool was designed to provide Cowen's institutional clients with insights across LTL, TL, and parcel shipping segments (divided into express and ground services).
The index's creation responds to a critical market need—not for more data, but for sophisticated analysis that extracts meaningful patterns from vast information pools. By combining AFS's extensive freight data across transportation modes with advanced analytical techniques including machine learning algorithms, the index delivers comprehensive market intelligence.
Key value propositions include:
- Comprehensiveness: Covers three major freight sectors for holistic market visibility
- Depth: Moves beyond raw data to reveal underlying market dynamics
- Predictive capability: Combines historical data with macroeconomic factors for forward-looking projections
- Practical application: Delivers actionable recommendations for optimizing transportation strategies
AFS CEO Andy Dyer notes: "While current macroeconomic indicators show some positive signals for carriers, the forces shaping 2024's freight market will continue influencing the coming quarter. No demand-side stimulus appears sufficient to alter the freight cycle's established pattern. Despite increasing carrier exits, supply-side adjustments haven't yet reached levels needed to offset soft demand."
II. Truckload (TL): Glimmers of Hope Amid Persistent Challenges
As a critical logistics component, truckload market conditions directly impact overall industry efficiency and costs. The index reveals both encouraging signs and ongoing difficulties:
Recent data shows promising developments including spot rate increases and higher tender rejection rates, suggesting carriers are becoming more selective. However, these spot market improvements haven't translated to contract pricing, with excess capacity continuing to pressure the market.
TL linehaul costs have declined for eight consecutive quarters, reaching their lowest point in this period—though still 11.6% above pre-pandemic levels. This cost reduction benefits shippers but reflects significant carrier profitability pressures.
The index projects Q1 2025 TL rates will remain stable at 5.1% above the January 2018 baseline, matching the previous quarter's level with a modest 0.2% year-over-year increase.
III. Parcel Shipping: The Tension Between Pricing Strategy and Market Reality
The parcel sector's evolution directly affects e-commerce growth. Current market dynamics reveal complex challenges:
Peak season pricing adjustments proved effective for carriers, with new demand surcharges increasing Q4 ground parcel surcharges by 16.4%. Fuel surcharge modifications also boosted revenues—ground parcel net fuel costs rose 4.7% despite a 4.6% diesel price decline.
However, underlying market conditions show soft demand, intense competition, and widespread discounting. Q4 2024 express parcel rates declined both quarterly and annually, sitting just 0.5% above the January 2018 baseline. While Q1 2025 projections anticipate seasonal growth from general rate increases (GRIs), the predicted 4.1% increase represents a year-over-year decline reflecting aggressive discounting.
IV. Less-Than-Truckload (LTL): Testing the Limits of Pricing Discipline
Positioned between TL and parcel shipping, LTL market conditions reflect multiple influencing factors:
LTL rates have remained stable, though signs suggest carriers' pricing discipline may be weakening. Unlike TL's prolonged rate slump, LTL pricing has stayed elevated since Q3 2023, with Yellow Freight's bankruptcy creating necessary capacity constraints. However, recent data indicates this discipline may be faltering, with Q4 2024 LTL costs per shipment declining 1.3%—significantly outpacing a modest 0.3% drop in shipment weight.
Fuel surcharge reductions provide further evidence of eroding pricing power. Major LTL carriers' average fuel surcharges fell 3.4% from Q3 2024, with net fuel surcharges per shipment dropping 5.5%.
The index forecasts Q1 2025 LTL rates per pound will maintain positive annual trends for a fifth consecutive quarter, though growth continues slowing—the projected 62.4% reading represents just a 0.4% year-over-year increase with a 0.2% quarterly decline.
V. Conclusion: Finding Certainty in Uncertain Times
The TD Cowen-AFS Freight Index provides valuable visibility into current freight market conditions. By analyzing TL, parcel, and LTL sectors, logistics professionals gain crucial insights for strategic decision-making.
While TL shows tentative positive signs, full recovery remains challenging. The parcel sector balances pricing strategies against market realities, while LTL stability faces growing pressures. In this environment, understanding these trends becomes essential for optimizing transportation strategies and maintaining competitive advantage.