While much attention has been directed toward the dynamics of the truckload market, understanding the concurrent shifts within the less-than-truckload (LTL) sector is equally critical for stakeholders across the supply chain.
Spot’s Director of LTL, Tom Chew, examined the evolving freight market as discussed by publicly traded LTL carriers during their recent quarterly earnings calls, highlighting key trends and potential implications for the industry and its future.
What is the common theme resulting from these calls?
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- Sustained Focus on Pricing Discipline and Profitability: Despite market shifts, maintaining profitable pricing strategies remains the paramount concern for LTL carriers.
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- Strategic Capacity Expansion Following YRC’s Exit: The 2023 departure of Yellow Corporation’s LTL subsidiary, YRC, created opportunities for remaining carriers to acquire facilities strategically and expand their service networks into new and existing markets. These strategic expansions initiated in 2023 continue to influence the competitive landscape and available capacity in the LTL market into 2025.
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- Higher Operating Costs Meet Softer Demand: While capacity has increased due to expansion, the anticipated surge in freight volume has not materialized, largely due to tariff uncertainties and weakened overall demand.
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- Prioritizing Profitability Amidst Uncertainty: With increased capacity and operating expenses coupled with sluggish demand, LTL carriers prioritize profitability and efficient operations.
What does this mean for shippers?
If you’re shipping LTL freight, the bottom line is that rates will remain steady or even trend upward.
LTL carriers prioritize stable pricing to ensure they can continue providing reliable service as their operating costs increase. We don’t believe major carriers will engage in price wars to grab more business.
As ABF Freight’s Chief Commercial Officer pointed out, the industry focuses on maintaining healthy pricing rather than sacrificing it for volume. ABF Freight saw an average contractual rate increase of 4.9% compared to last year.
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- Budget accordingly: Factor in the likelihood of consistent or potentially higher LTL shipping costs.
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- Focus on value, not just price: Consider your carriers’ overall service quality and reliability, as price reductions may not be their primary strategy.
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- Negotiate strategically: While deep discounts might be less common, explore opportunities for value-added services or optimized pricing based on your specific shipping patterns.
In short, the current LTL market suggests a stable pricing environment in which carriers are focused on long-term sustainability and service delivery.
What are other carriers saying?
To give you a broader picture of what’s happening directly from the carriers themselves, here are some key insights:
The Pressure of Rising Costs:
As highlighted in a FreightWaves article discussing Saia’s Q1 performance: “Saia’s cost per shipment was up 9.4% year-over-year while revenue per shipment increased just 1.5%, a nearly 800-basis point negative spread. Salaries, wages, and benefits expenses (as a percentage of revenue) were 410 basis points higher year-over-year, and depreciation expense was up 100 basis points year-over-year.” This underscores the significant pressure that rising operational costs are placing on carriers.
Maintaining Pricing Discipline:
Saia’s CFO, Matt Batteh, addressed their pricing strategy directly: “For us, we’re focused on pricing no different than we have been in the past… Of course, customers always challenge the pricing increases that we propose, and with the looser capacity environment that gets a little bit louder, but no difference in focus on our side.” This reinforces their commitment to maintaining pricing integrity despite market fluctuations.
The Necessity of Rate Increases:
Old Dominion Freight Line’s (ODFL) CFO, Adam Satterfield, explained their approach to yield management: “We’re fully committed to our long-term yield management strategy [because] our costs aren’t decreasing… Our costs continue to go up, and so that’s why we’ve got to continue to ask for increases.” This clearly articulates the link between rising costs and the need for rate adjustments.
FreightWaves also noted ODFL’s cost and revenue per shipment trends: “Cost per shipment was up 3.3% with revenue per shipment up just 0.7%, resulting in a 260-basis point negative spread.” This further illustrates the margin pressures carriers are facing.
These insights, directly from carrier leadership and financial reports, paint a clear picture: rising operational costs are a significant concern, and maintaining pricing discipline, often through rate increases, is a necessary strategy for these carriers to remain sustainable.
What Can Shippers Look Out for in the LTL Market in 2025?
Looking ahead in 2025, shippers should be aware of a significant development: the National Motor Freight Traffic Association (NMFTA) is overhauling the freight classification system this July. This shift towards a density-based model for classifying commodities will impact how various types of freight are categorized, ultimately affecting shipping rates. The NMFTA is also updating its ClassIT website and services for shippers and 3PLs. For a deeper dive into these changes, stay tuned for the next edition of “Chew on This.”
Need reliable LTL shipping? Spot has you covered. We simplify the process and always deliver your freight on time.