Fundamental analysis of factors that drive freight market conditions suggest a tough business environment for at least in the first half of the 2024 with potential recovery in the latter part of the year:
- Despite this month’s improvement, the Conference Board's Consumer Expectations Index remains below 80 for a third consecutive month—a level that historically signals a potential recession within the next year. Consumer demand is expected to be tepid in the first half of 2024.
- With a lot of uncertainty around consumer demand, interest rates and the global economy, most people do not have a positive outlook on freight volumes in the first half of next year. On-going global disruptions, such as the Israel-Hamas and Ukraine conflicts, could create volatility to oil prices, and, in turn, market rates, during 2024.
- Freight rates will likely remain low for the first nine months of 2024, with a potential for growth and a return to true peak shipping season in Q4.
- Retail inventories remain higher than preferred at the end of 2023, dampening the level of new orders for domestic and overseas suppliers and, therefore, the level of goods to move.
- Soft pricing in the shipping sector will continue in 2024 and could linger into 2025, as capacity in the logistics sector continues to outstrip weaker demand.
- Excess capacity in the trucking sector, already facing extreme financial stress. expect lower freight orders and revenue potentially into the first half of 2024. Falling freight rates caused a total of 31,278 trucking companies to either close or shift their services to larger fleets. Even though conditions are improving, there is still over-capacity in the marketplace (too many trucks chasing too little freight). This situation will continue to correct itself over the next 6-9 months.
- As the freight market comes out of the doldrums, shippers may pay higher prices to ship their Freight later in 2024. Expect the next stage of the freight cycle to be harder on freight brokerages than shippers. Many shippers have started to prefer asset-based carriers in their routing guides, which has meant lost volume for brokers. Lower volumes mean lower margins for brokers. Consequently, many brokers with freight committed to contract rates will see their margins squeezed.
If you are a carrier or broker, the pacesetter productivity and fluidly connected Smart EKA end-to-end supply chain TMS platform can help carriers, brokers, and shippers “roll with the punches” to help navigate through the rapidly changing freight business environment to grow and prosper in year 2024 and beyond.
JJ Singh, CEO, EKA Solutions, Inc.