Trucking executives are declaring an end to one of the longest freight downturns in carriers’ memory, with rates rising to sustainable levels after nearly four years of slumping earnings.
“It feels like a breath of air for an industry that maybe felt like they were running out of air,” said Webb Estes, president and chief operating officer of Estes Express Lines, a Richmond, Va.-based carrier with revenue of about $6 billion.
The Logistics Managers’ Index, a monthly survey of supply-chain managers, showed transportation prices increased in May at the fastest rate for any metric in the report’s 10-year history.
“This is the hottest that the transportation market has been in over four years,” the report said.
Dry-van spot rates for the week ended June 5 were up about 52% year-over-year excluding fuel surcharges, according to a report from FTR Transportation Intelligence and Truckstop.com.
Estes said because of the stronger freight market over the past few months, the nationwide company is increasing its fleet of more than 10,500 trucks and expanding its pool of about 11,000 drivers.
Sidney Brown, a co-owner and chief executive of NFI Industries, which operates one of the nation’s largest truck fleets, said freight rates are rising even as shipment volumes are flat or only slightly up on last year’s levels.
“This has been a supply-driven freight recovery as opposed to a demand-driven freight recovery,” Brown said.
The turnaround comes after four years in which carriers have been squeezed by a combination of too many trucks on the road and not enough loads. Drivers rushed into the industry during the pandemic as Covid-driven consumer demand drove freight rates to record highs. Rates plummeted in 2022, forcing hundreds of thousands of smaller carriers out of business. Many truckers held on even as costs for drivers, equipment and insurance rose.
The exodus accelerated over the past year as the Trump administration enforced English language proficiency rules for drivers and introduced regulations that barred many immigrants from obtaining or renewing commercial driver’s licenses. By the end of last year, even some midsize carriers had shut down.
Trucking specialists say the industry has finally found an equilibrium where the supply of trucks is low enough to lift rates.
Higher fuel prices due to the war in Iran have pushed up trucking companies’ expenses, but operators are largely passing along those costs to their customers.
Shelley Simpson, CEO of J.B. Hunt Transport Services, one of the largest for-hire carriers in the country, said on an April earnings call that the market felt “meaningfully different” from recent years. “While predicting inflection points is never precise, we believe we are on a path of recovery,” she said.
Old Dominion Freight Line reported revenue per hundredweight excluding fuel surcharges rose 5.4% year-over-year for the second quarter through May. Old Dominion is one of the largest carriers focused on the less-than-truckload market, which combines shipments from multiple companies.
“Demand has continued to improve as the quarter has progressed,” said ODFL Chief Executive Marty Freeman.
The recovery hasn’t been even. Consumer demand has remained relatively flat, as has construction of new homes, both major drivers of logistics activity.
At the same time, U.S. factory activity climbed in May for the fifth consecutive month, according to the Institute for Supply Management. Soaring demand for new data centers has helped lift the spot rate for flatbed trucks to what the FTR and Truckstop.com report said is an all-time high.
“We’re very much starting to see the U.S. manufacturing base accelerate and influence freight volumes,” said Daniel Moore, a senior research analyst at financial services firm Baird.
Jason Miller, a logistics professor at Michigan State University, said the industry will now wait to see whether the Federal Reserve will raise interest rates following a strong April jobs report.
“If the Fed raises rates, that’s not going to be good for the demand side picture in trucking,” Miller said.