The trucking industry is entering a new phase, and the business landscape is changing. But this won’t be as simple as flipping a switch. To navigate the ebbs and flows, it pays to keep an eye on key indicators that will influence the nature of this next business cycle.
This is an excerpt from our annual report, “Freight Focus.” Read it in full in full here.
Tighter markets in 2025
One key metric we watch is the New Rate Differential (NRD). This analyzes all new contract rates entering the DAT iQ database and compares them to the rates they’re replacing. From May 2022 to July 2024, this number was negative, meaning that shippers were enjoying savings in their new RFPs.
The NRD turned positive in August, meaning that, on average, shippers’ new contract rates were now higher than the ones they previously negotiated. As carriers continue to exit the marketplace, we expect this trend to continue.
The barrier for entry for new carriers is also likely the highest it’s been in the deregulation era. Operating costs for new carriers are nearly 20% higher than for more established carriers. That’s due to both higher insurance premiums and the financing costs associated with the inflated used truck market of 2021/22.
With fewer new carriers replacing the ones exiting the marketplace, truckload capacity tightens. As a result, analysts should anticipate rate increases akin to pre-pandemic levels, offering potential advantages for larger carriers with robust networks and negotiating power.
Which leads us to the million dollar question: When is the market going to flip? Barring a major disruption that accelerates the process, current DAT iQ forecasts predict Q2 at the earliest.
Possible headwinds?
While the market is broadly (and perhaps slowly) moving in the favor of carriers, transportation providers are still facing uncertainty.
Trade policies: The new Trump administration’s focus on tariffs and renegotiated trade deals may lead to changes in supply chain sourcing and shifts in truckload demand.
Global geopolitics: As we saw with the spike in oil prices after Russia’s invasion of Ukraine, global events can have downstream effects on trucking, with ongoing conflicts creating more uncertainty.
Regulations: While the regulatory climate is expected to be more lax under a Trump administration, Trump did choose an AB5 supporter for labor secretary, and more states may pursue similar policies along with tighter emissions standards.
Labor strife: Recent worker strikes at the ports and elsewhere put strain on supply chains, which could carry over into 2025.
Immigration: Mass deportations could affect workforces in California farms and Midwest packing plants, which could lead to lower lower truckload volumes.
Key indicators to monitor
Understanding and predicting the trends in the transportation market requires careful attention to a range of metrics and indicators. Here is a list of key data points to keep an eye on:
- Spot vs contract rates: Tracking fluctuations in these rates within the DAT database will offer insight into short-term and long-term pricing trends.
- Market Conditions Index: Along with load-to-truck ratios, this is a crucial indicator of market demand and capacity constraints, providing early signs of changing conditions.
- Fuel prices: Regular updates from sources such as the U.S. Energy Information Administration can highlight cost pressures on transportation providers.
- Class 8 truck orders: Monitoring industry reports on truck manufacturing orders can indicate future capacity increases or decreases.
- Employment rates in the logistics sector: Insights from the Bureau of Labor Statistics on employment trends will affect the availability of drivers and operational efficiency.
- Global trade volumes: Data from the World Trade Organization or national customs agencies can shed light on international shipping and its effect on domestic transportation.
- Interest rates: Expected rate decreases would affect consumer behavior.
Other trends that will shape 2025
Automation and AI: Technological advancements in logistics have hastened, with companies able to streamline operations to respond quickly to market changes.
Data and analytics adoption: The analytics revolution hit transportation in full force in recent years, changing the way many businesses procure transportation. These real-time insights will allow more players to ride the ups and downs of truckload pricing waves.
Trust and confidence: The post-covid surge in fraud underscored the importance of trusted partnerships. Heightened vetting practices will be put to the test when markets heat up.
