New York – TD Cowen and AFS Logistics have jointly released their highly anticipated Q1 Freight Index Report, offering cautious optimism for a freight market that has endured challenging conditions throughout 2024, while simultaneously highlighting the complex obstacles that may persist into 2025. The comprehensive analysis examines three critical sectors: truckload, parcel, and less-than-truckload (LTL) transportation, identifying potential recovery signals amidst persistent demand weakness, excess capacity, and evolving pricing strategies.
Since its launch in October 2021, the TD Cowen/AFS Freight Index has become an indispensable tool for TD Cowen's institutional clients, providing forward-looking pricing insights across freight market segments. Leveraging AFS Logistics' extensive freight data resources and advanced analytical techniques including machine learning, the index delivers a nuanced perspective on market dynamics. Beyond historical data, the report incorporates macroeconomic and microeconomic factors, along with recently announced General Rate Increases (GRIs) from major parcel carriers, offering a unique and comprehensive review of past performance and near-term prospects.
Key Findings: Sector-Specific Analysis
The TD Cowen/AFS Freight Index reveals these primary findings across transportation modes during Q1:
Truckload: Emerging Optimism Amid Persistent Challenges
The truckload sector displayed tentative signs of improvement in Q1, despite generally flat demand. Rising spot rates and increasing tender rejection rates indicate carriers are becoming more selective about freight acceptance. This trend suggests carriers are pursuing higher margins and may gain negotiating leverage with shippers. However, spot market gains haven't yet translated to contract rates, with the market remaining oversupplied.
Truckload linehaul costs per shipment declined for the eighth consecutive quarter, reaching their lowest point during this period, yet remain 11.6% above pre-pandemic levels.
Spot vs. Contract Market Divergence: The spot market's responsiveness to changing conditions typically reflects supply-demand dynamics more rapidly than the contract market, where adjustments lag due to longer-term commitments. This divergence illustrates carriers' conflicting priorities between pursuing immediate profitability and maintaining contract competitiveness.
Oversupply Persistence: Despite some carrier exits, overall capacity continues to exceed current demand, maintaining shippers' negotiating advantage and suppressing contract rates. This oversupply stems from multiple factors including pandemic-era capacity expansion, slowing economic growth, and shifting consumer spending patterns.
Looking ahead, the report forecasts Q1 2025 truckload rates per mile will remain stable at 5.1% above the January 2018 baseline, unchanged from the previous quarter with a 0.2% year-over-year increase, suggesting the market may be entering a transitional phase.
Parcel: Pricing Strategy Success vs. Discounting Concerns
The report demonstrates how pricing adjustments served carriers effectively during peak season. Newly introduced "bundled" demand surcharges drove Q4 ground parcel average accessorial charges 16.4% higher than Q3. Continued adjustments to fuel surcharge tables also benefited carriers, with Q4 average net fuel costs for ground parcels increasing 4.7% quarter-over-quarter despite a 4.6% decline in highway diesel prices.
However, underlying market realities of soft demand, intense competition, and sustained discounting persist. Q4 2024 express parcel rates per package declined both sequentially and annually to just 0.5% above the January 2018 baseline. While Q1 2025 projections anticipate seasonal increases from carrier GRIs, the 4.1% forecast represents a year-over-year decline—a consequence of aggressive annual discounting.
LTL: Pricing Discipline Under Pressure
LTL rates have maintained stability, but emerging signs suggest carriers' pricing discipline may be weakening. Unlike truckload's prolonged rate depression, LTL pricing has remained elevated since Q3 2023, when Yellow Freight's bankruptcy provided necessary capacity tightening. While carriers have largely maintained these higher rates, recent data indicates this discipline is fading.
Q4 2024 saw LTL costs per shipment decline 1.3% quarter-over-quarter, significantly exceeding the 0.3% decrease in shipment weight during the same period. Analysis of fuel surcharges—a primary driver of this decline—reveals deteriorating pricing discipline, with major LTL carriers' average fuel surcharges falling 3.4% from Q3.
Conclusion: Cautious Optimism Amid Market Transition
The TD Cowen/AFS Freight Index Q1 report portrays a freight market at an inflection point. While truckload shows tentative improvement, oversupply and weak demand remain formidable. Parcel carriers' pricing strategies have partially offset demand declines, but discounting creates long-term vulnerabilities. LTL's pricing discipline shows signs of erosion as growth slows.
Future market direction will hinge on three critical factors: demand recovery strength , capacity adjustment progress , and carrier pricing strategy evolution . Market participants must monitor these dynamics closely to navigate the evolving freight landscape effectively.