As global economic recovery remains uneven amid soft demand and excess capacity, the freight transportation sector is undergoing unprecedented transformation. The latest TD Cowen/AFS Freight Index sheds light on emerging patterns across different transportation modes while highlighting both challenges and opportunities.
Key Findings
Truckload (TL) Sector
While demand remains sluggish, rising spot prices and increased tender rejections suggest early signs of recovery. However, persistent overcapacity continues to suppress contract rates. The Q1 2025 forecast anticipates stable per-mile rates with marginal improvements potentially signaling the beginning of a rebound.
Parcel Shipping
Carriers are leveraging sophisticated pricing strategies during peak seasons, including dynamic surcharges and fuel cost adjustments. Despite these measures, the sector faces headwinds from soft demand, intense competition, and widespread discounting. Express parcel rates are expected to show seasonal growth but decline year-over-year, while ground parcel demonstrates greater resilience though still affected by prior discounting.
Less-Than-Truckload (LTL)
While rates remain elevated following Yellow Freight's market exit, emerging data suggests weakening pricing discipline among carriers. The Q1 2025 forecast indicates continued annual growth in per-pound rates, though at a decelerating pace.
TD Cowen/AFS Freight Index: A Market Barometer
The quarterly index, jointly developed by New York investment firm TD Cowen Inc. and Louisiana-based logistics specialist AFS Logistics, provides predictive pricing analysis across transportation modes. Utilizing AFS's extensive freight data combined with machine learning algorithms, the model incorporates both historical patterns and current macroeconomic factors, including recently announced general rate increases (GRIs) from major parcel carriers.
AFS CEO Andy Dyer noted: "While some positive macroeconomic signals exist for carriers, the fundamental market forces shaping 2024 will persist into next quarter. Neither sufficient demand recovery nor adequate supply-side adjustments have materialized to alter the current freight cycle."
Detailed Mode Analysis
Truckload: Challenges Amid Emerging Opportunities
- Persistent soft demand and excess capacity continue to pressure the market
- Spot market improvements haven't translated to contract rates
- Linehaul costs have declined for eight consecutive quarters, now 11.6% above pre-pandemic levels
- Q1 2025 forecast shows stable per-mile rates at 5.1% above January 2018 baseline
Parcel: The Pricing Strategy Tightrope
- Demand surcharges and fuel cost management helped offset soft volumes
- Ground parcel outperformed express, with Q4 2024 rates up 24.4% from baseline
- Aggressive discounting continues to pressure year-over-year comparisons
- Q1 2025 projections show 4.1% seasonal increase for express (down year-over-year) and 28.2% for ground (slightly below peak)
LTL: Pricing Discipline Under Pressure
- Rates remain elevated post-Yellow Freight exit but show signs of softening
- Q4 2024 saw linehaul costs decline 1.3% despite only 0.3% weight reduction
- Fuel surcharge reductions suggest growing competitive pressure
- Q1 2025 forecast shows fifth consecutive annual increase at 62.4%, though growth continues slowing
Market Influencers
Several macroeconomic factors continue shaping freight markets:
- Uneven global economic recovery
- Consumer spending caution
- Manufacturing sector softness
- Volatile fuel prices
- Persistent labor shortages
- Technology-driven transformation
Strategic Considerations for Carriers
To navigate current market conditions, transportation providers should:
- Enhance market monitoring capabilities
- Develop dynamic pricing strategies
- Optimize operational efficiency
- Expand service offerings
- Accelerate technology adoption
- Strengthen risk management frameworks
Conclusion
The Q1 2025 freight outlook presents a complex picture across transportation modes. While truckload shows tentative recovery signs, parcel carriers balance pricing strategies against market realities, and LTL providers face growing pricing pressure. Successful navigation of these conditions will require carriers to maintain operational flexibility while strategically positioning for eventual market recovery.