Truck drivers exhausted from long hauls, fuel gauges steadily dropping, while freight rates remain stubbornly low—this isn't a fictional movie scene but the harsh reality confronting today's transportation sector. The Q3 Freight Index released by TD Cowen and AFS Logistics serves as a sobering industry health check, revealing how carriers struggle to survive under multiple pressures including capacity glut, declining rates, and tariff policy impacts.
Industry-Wide Strain
The index, jointly developed by New York investment firm TD Cowen Inc. and Louisiana-based logistics provider AFS Logistics LLC, provides a comprehensive analysis of challenges facing freight transportation. Leveraging AFS's multimodal shipment data and machine learning algorithms, the model incorporates both historical trends and current macroeconomic factors—including recent General Rate Increase (GRI) announcements from major parcel carriers.
"While the initial shock and awe of high-profile tariff announcements earlier this year have faded, businesses continue grappling with policy repercussions," said AFS CEO Andy Dyer. "We're now in year three of an unusually prolonged freight cycle, where carriers are applying hard-won lessons to prioritize profitability amid soft market conditions."
Mode-Specific Analysis
1. Truckload Sector
- Cost Trends: Linehaul costs per shipment rose 1.5% YoY in Q3, ending consecutive quarterly declines, attributed to better-than-expected Q2 GDP and September's 25-basis-point federal funds rate cut.
- Persistent Challenges: Three years of rate declines from oversupply continue squeezing margins. Q4 rates are projected at 6.1% above January 2018 baseline—up 0.001% QoQ and 0.9% YoY—marking 11 straight quarters below 6.2%.
- Regulatory Impact: DOT's stricter commercial driver compliance rules removed ~3,000 operators from the market, exacerbating capacity issues while potentially improving long-term safety standards.
2. Parcel Shipping
- Duopoly Dynamics: FedEx and UPS continue raising industry benchmarks through base rate adjustments and proliferating surcharges—including holiday demand, oversized package, and blanket fees.
- Cost Drivers: Higher billable weights, fuel costs, and premium service mixes pushed per-package costs up 0.03% QoQ.
- Trade Policy Fallout: Elimination of de minimis duty exemptions has increased operational complexity and dampened low-value cross-border shipment volumes.
3. Less-Than-Truckload (LTL)
- Diverging Metrics: Per-shipment costs fell 1.8% QoQ as average weights dropped 3.0%, widening performance gaps among carriers.
- Demand Weakness: Industrial slowdowns drove 7.4% YoY weight decline, though disciplined cost containment limited expense reduction to 0.7%.
- Index Record: The LTL index hit an all-time high of 65.1% in Q3, projected to moderate slightly to 64.8% in Q4.
Strategic Imperatives
The report underscores how digital transformation—through AI-driven route optimization, IoT-enabled fleet management, and data analytics—will separate resilient carriers from vulnerable competitors. While macroeconomic signals like GDP growth and interest rate cuts provide tentative optimism, structural oversupply and policy uncertainties demand operational agility.
With tariff fluctuations continuing to disrupt supply chains and e-commerce growth reshaping parcel demand, transportation firms must balance short-term survival tactics with long-term technological investments to navigate this protracted downcycle.