September 2024 Market Update Spot

Logistics Market Update: September 2024

October 3, 2024

At Spot, we understand the vital role that up-to-date information plays in navigating the dynamic logistics market. Each month, we bring you a comprehensive logistics market update. We dive into the latest trends, challenges, and innovations shaping the logistics sector. Join us as we empower you with the knowledge needed to make informed decisions in this fast-paced industry.

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The freight market in September 2024 continues to steer through a challenging environment of fluctuating demand, shifting capacity, and evolving economic pressures. Key indicators such as freight demand, capacity constraints, and freight pricing are shaping the industry, with significant implications for both shippers and carriers.

Volume Dips Slightly, but Retail and E-Commerce Boost Demand

Freight demand has shown resilience, with sectors such as retail driving growth. Real median household incomes have seen a 3.96% increase from the previous year, bolstering consumer spending and supporting freight demand across various industries, particularly retail and e-commerce. Freight volume trends for September 2024 indicate a slight dip, with the For-Hire Trucking Ton-Mile Index reporting a 0.3% year-over-year decline in July 2024, the smallest negative shift since early 2023. This minor contraction reflects stabilizing demand, with expectations of improvement in early 2025 as interest rates potentially decrease.

Manufacturing and freight demand are also intertwined, with industries such as motor vehicle and parts manufacturing contributing about 5% of total trucking demand. However, capacity constraints in freight are influencing overall market dynamics, particularly as the automotive sector faces production slowdowns due to high dealer inventories.

Freight Market Sees Slight Spot Rate Decline Amid Increased Carrier Availability

In September 2024, spot freight rates saw a marginal decline, reflecting seasonal downturns and lower urgency in shipments. The National Truckload Index (Linehaul Only) dropped from 1.71 to 1.66, indicating slightly lower spot market rates. This decline points to either decreased demand or an increase in carrier availability, further easing the pressure on spot rates.

On the other hand, contract freight rates have remained relatively stable. The slight increase in the Outbound Tender Reject Index, from 4.41 to 4.45, signals a tightening in capacity on specific routes, as carriers show a preference for higher spot market rates over contracted loads. This trend, though subtle, highlights the delicate balance between spot vs. contract market dynamics.

In the broader context, carrier operating costs have been mitigated by lower fuel prices, which are now averaging $3.56 per gallon. This is a significant decrease from previous highs, providing some relief for carriers despite lower freight rates.

Capacity Rebalances as Truckload Payrolls Drop 4.4%

Freight capacity outlook for September 2024 reflects a nuanced picture. While dry van truckload payrolls have decreased by 4.4% since December 2022, carrier availability has remained steady. The reduction in payrolls aligns with early 2019 capacity levels, pointing to a gradual rebalancing of supply and demand. However, logistics challenges in 2024, such as capacity constraints, persist in specific sectors, influencing rates and freight cost drivers.

Recent declines in load-to-truck ratios across all major equipment types, including a van ratio decrease from 3.86 in August to 3.27 in September, indicate a softening in freight demand. These ratios, sourced from DAT One Marketplace, provide valuable insights into current market conditions, suggesting lower demand relative to available trucks.

ILA Port Strike Impact

The port strike disruption poses a significant threat to supply chains. The International Longshoremen’s Association (ILA), representing 85,000 dockworkers, seeks wage increases, job security, and protection against automation. With no agreement in place, this strike could halt 50% of U.S. import/export activity, stranding cargo, rerouting goods, and driving up costs Immediate impacts include escalating costs for goods like food, vehicles, and electronics, with ocean carriers announcing surcharges as high as $3,000 per container. The operational backlog from even a short strike could last weeks.

With ripple effects spanning multiple sectors, from retail to agriculture, a prolonged strike could cost the U.S. economy up to $5 billion daily.

Shippers Turn to Long-Term Contracts to Mitigate Spot Market Volatility

The broader economic environment continues to influence the freight market. The recent uptick in real median household incomes supports consumer spending, a crucial driver of freight demand. However, the ongoing economic impact on freight is complex, with uncertainties surrounding future supply chain trends. Events such as the 2024 U.S. presidential election and potential disruptions in global supply chains could further impact freight volumes and pricing.

The ongoing balance between supply and demand also shapes freight market trends for September 2024. While freight volume has remained relatively stable, factors such as fluctuating fuel costs and external disruptions—like port strikes—could affect long-term market dynamics. Shippers are increasingly looking to lock in long-term contracts to secure capacity and avoid the volatility seen in the spot market.