Imagine standing at the center of a massive freight marketplace, surrounded by an endless stream of trucks, packages, and goods moving in every direction. How can businesses find their bearings in this complex logistics network and identify emerging opportunities? The TD Cowen-AFS Logistics Freight Index serves as a precise navigational tool, offering clarity and direction.
TD Cowen-AFS Freight Index: Your Market Barometer
TD Cowen Inc. and AFS Logistics LLC have collaborated since October 2021 to produce a quarterly freight index that provides institutional clients with forward-looking pricing analysis. Covering key segments including less-than-truckload (LTL), truckload (TL), and parcel shipping (divided into express and ground services), the index delivers comprehensive market insights through deep data analysis and advanced modeling.
Data-Driven Market Predictions
The index's strength lies in its robust data foundation and sophisticated analytical approach. AFS Logistics contributes extensive freight data across multiple transportation modes, while TD Cowen applies machine learning algorithms to extract meaningful patterns and build predictive models that accurately reflect market conditions. These models incorporate both macroeconomic and microeconomic factors, along with the latest general rate increase (GRI) announcements from major parcel carriers, ensuring timely and precise forecasts.
Key Q1 Index Findings
"While there are some positive signals for carriers in the current macroeconomic outlook, the factors influencing the 2024 freight market will continue to dominate in the near term," said AFS CEO Andy Dyer. "No demand-side stimulus has emerged to alter the freight cycle status of recent years, and while increasing numbers of carriers are exiting the market, supply-side adjustments haven't yet reached the scale needed to offset weak demand."
The index provides detailed analysis across three major transportation segments:
1. Truckload (TL): Cautious Optimism Amid Weak Demand
Despite persistent soft demand, the truckload market shows tentative signs of improvement, with spot rates rising and tender rejection rates increasing—indicating greater carrier selectivity in accepting loads. However, these spot market gains haven't translated to contract rates, as excess capacity continues to weigh on the market. Truckload linehaul costs per shipment declined for the eighth consecutive quarter, reaching their lowest point in that period, though remaining 11.6% above pre-pandemic levels.
Looking ahead, based on current conditions and seasonal patterns, the Q1 2025 truckload rate per mile index is projected to remain stable at 5.1% above the January 2018 baseline—unchanged from the previous quarter and up 0.2% year-over-year.
Key Takeaways:
- Soft demand: Market demand shows no significant improvement, with excess capacity persisting.
- Spot market recovery: Rising spot rates and tender rejections suggest improving market sentiment.
- Contract rate lag: Spot market gains haven't yet influenced contract pricing.
- Cost reductions: Continued linehaul cost declines help lower shipping expenses.
- Outlook: Rates expected to remain stable in the near term, with close monitoring of supply-demand dynamics needed.
2. Parcel Shipping: Pricing Strategies Succeed Amid Heavy Discounting
The index reveals that pricing adjustments proved effective for carriers during peak season. New "bundled" demand surcharges drove a 16.4% quarter-over-quarter increase in average ground parcel surcharges in Q4. Ongoing adjustments to fuel surcharge tables also boosted carrier revenues. Despite a 4.6% decline in highway diesel prices, average net fuel costs for ground parcels rose 4.7% quarter-over-quarter. A similar disconnect appeared in express parcels, where Gulf Coast jet fuel prices fell 8.8% quarter-over-quarter while carrier fuel surcharges dropped just 2.7%.
UPS implemented its eighth 2024 fuel surcharge increase in December, this time modifying the fee curve to accelerate surcharge increases when diesel prices rise while slowing decreases when prices fall. However, beneath these pricing adjustments lies a market reality of weak demand, intense competition, and persistent discounting.
In Q4 2024, the express parcel rate per package index declined both quarter-over-quarter and year-over-year, standing just 0.5% above the January 2018 baseline. While Q1 2025 is expected to show seasonal growth from carrier GRIs, the projected 4.1% increase represents a year-over-year decline resulting from aggressive annual discounts. Ground parcel carriers achieved better results, with the Q4 2024 rate per package index growing both quarterly and annually to 24.4%. With 2025 GRIs taking effect, Q1 2025 ground rates face upward pressure, projected to reach 28.2%, though still slightly below year-ago levels and 2% below the peak two years prior.
Key Takeaways:
- Effective pricing: Surcharges and fuel adjustments successfully improved carrier profitability.
- Persistent discounts: Heavy discounting continues amid competitive pressures.
- Express challenges: Declining express rates pressure carrier margins.
- Ground stability: Ground parcel rates maintain growth, though at slowing pace.
- Outlook: Carrier pricing strategies and discounting activity will critically impact profitability.
3. Less-Than-Truckload (LTL): Stable Rates With Emerging Pricing Pressure
LTL rates remain elevated but show early signs of eroding carrier pricing discipline. Unlike the prolonged truckload rate slump, LTL rates have stayed high since Q3 2023, with Yellow Freight's bankruptcy creating necessary capacity tightness. Carriers have maintained these higher rates, but recent data suggests this discipline may be weakening. Q4 2024 saw LTL cost per shipment decline 1.3% quarter-over-quarter—significantly exceeding the 0.3% drop in shipment weight.
Examining fuel surcharges—a major cost component—reveals this emerging trend. Unlike parcel carriers' careful preservation and expansion of fuel surcharges, major LTL carriers' average fuel surcharges fell 3.4% quarter-over-quarter, with actual net fuel surcharges per shipment dropping 5.5%. While the Q1 2025 LTL rate per pound index is projected to extend its positive annual trend to five consecutive quarters, growth continues slowing—the 62.4% forecast represents just a 0.4% year-over-year increase and a 0.2% quarterly decline.
Key Takeaways:
- Rate stability: LTL rates remain high following Yellow's exit.
- Discipline erosion: Declining fuel surcharges suggest shifting carrier pricing strategies.
- Cost reductions: Lower per-shipment costs benefit shippers.
- Slowing growth: Rate increases continue decelerating as competition intensifies.
- Outlook: Carrier pricing strategies and fuel price volatility will influence future rates.
Conclusion
The TD Cowen-AFS Freight Index provides logistics professionals with valuable insights into market dynamics, trend forecasting, and strategic decision-making across truckload, parcel, and LTL segments. By combining comprehensive data analysis with advanced modeling techniques, the index offers a clear view of evolving market conditions, helping businesses navigate today's competitive freight landscape.