Imagine being a corporate strategist grappling with next quarter's logistics budget and transportation strategy. Conflicting market signals make it difficult to discern reality: Is truckload demand softening? Are parcel rates rising again? How long can less-than-truckload (LTL) pricing hold? The TD Cowen/AFS Freight Index serves as a navigational chart through these turbulent waters.
This quarterly report, a collaboration between New York investment firm TD Cowen Inc. and Louisiana-based third-party logistics provider AFS Logistics LLC, has provided forward-looking pricing tools for institutional clients since its October 2021 debut. Covering critical segments including LTL, truckload (TL), and parcel shipping (divided into express and ground services), the index offers deep analysis to help businesses manage transportation costs.
AFS Logistics leverages its extensive freight data resources and advanced analytical techniques like machine learning to build comprehensive models. These evaluate historical patterns while assessing current macroeconomic and microeconomic factors, including major carriers' recently announced general rate increases (GRIs). The partners emphasize that their index provides both unique historical perspective and near-term quarterly forecasts.
"While current macroeconomic indicators show some positive signals for carriers, the forces shaping the 2024 freight market will persist through the coming quarter," said AFS CEO Andy Dyer. "No demand-side catalyst appears likely to alter the freight cycle's multi-year trajectory. Though carrier exits continue, supply-side adjustments haven't yet reached the scale needed to offset soft demand."
Truckload: Cautious Optimism Emerges
Despite tepid demand, the index notes encouraging signs like rising spot prices and increased tender rejection rates, suggesting carriers are becoming more selective. However, this spot market momentum hasn't translated to contract rates, with excess capacity still weighing on the market. Truckload linehaul costs declined for an eighth consecutive quarter, reaching their lowest point of that period—just 11.6% above pre-pandemic levels.
The index projects flat per-mile rate performance in Q1 2025, maintaining a 5.1% premium over January 2018 baselines—unchanged from last quarter with minimal 0.2% annual growth. This indicates gradual recovery remains underway, though far from complete.
Parcel: Strategic Pricing Maneuvers
The index reveals how pricing adjustments became carriers' key tool during peak season. New bundled demand surcharges pushed Q4 ground parcel surcharges 16.4% above Q3 levels. Fuel surcharge table adjustments also paid dividends—while highway diesel prices fell 4.6%, average ground parcel net fuel costs rose 4.7% quarterly.
A similar disconnect appeared in express parcels. Despite Gulf Coast jet fuel prices dropping 8.8% quarterly, carriers reduced fuel surcharges just 2.7%. UPS announced its eighth 2024 fuel surcharge increase in December, this time "tilting" the fee curve to accelerate surcharge growth during price spikes while slowing decreases during declines.
Yet beneath these pricing shifts lies sluggish demand, fierce competition, and persistent discounting. Q4 2024 express parcel per-package rates fell both quarterly and annually, barely 0.5% above January 2018 baselines. Q1 2025 projections show seasonal GRI-driven growth, but the anticipated 4.1% increase marks a year-over-year decline—reflecting aggressive annual discounts. Carriers found more success in ground services, where Q4 per-package rates grew both quarterly and annually to 24.4%. With 2025 GRIs taking effect, Q1 should see further upward pressure to 28.2%, though still slightly below 2023's peak.
LTL: Pricing Discipline Shows Cracks
While LTL rates remain firm, signs suggest carriers' pricing discipline may be weakening. Unlike truckload's prolonged slump, LTL pricing has stayed elevated since Q3 2023, with Yellow Freight's bankruptcy creating necessary capacity constraints. Carriers maintained high rates initially, but recent data shows cracks emerging. Q4 2024 LTL per-shipment costs fell 1.3% quarterly—significantly exceeding the 0.3% average weight decline.
Examining fuel surcharges—a primary driver of this decrease—reveals eroding pricing discipline. Unlike parcel carriers' careful surcharge management, major LTL operators' average fuel surcharges dropped 3.4% quarterly, with actual net surcharges per shipment falling 5.5%. Though Q1 2025's per-pound rate index should extend its positive annual trend to five quarters, growth continues slowing—the projected 62.4% reading barely exceeds 2024 by 0.4%, while declining 0.2% quarterly.
Ultimately, the TD Cowen/AFS Freight Index provides invaluable market intelligence, helping businesses navigate today's complex logistics landscape while preparing future strategies. In an era of both challenge and opportunity, this tool proves essential for informed decision-making.