It’s the end of an era – the freight recession era. The rumblings have begun that this could be the beginning of better times. Not that we’re looking to repeat the market insanity of 2020, but dare I say a return to normalcy might be in our future for early 2025?
The rationale behind the view that the freight recession has ended? Well, that would be the increasing tender rejection rates. According to FreightWaves CEO Craig Fuller, “Following a decisive election, I believe the freight market is recovering and might exceed expectations over the next year.”
Tender rejection rates rising around this time of year isn’t atypical as it’s peak season. However, the sustained increase that is higher than 2022 and 2023 levels indicates this might be the flip the market is searching for.
Also contributing to the rise in demand is likely going to be the impacts brought on by the Federal Motor Carrier Safety Administration’s Clearinghouse-II regulation next Monday. Basically this new regulation removes anyone with a Class A CDL license in prohibited status from the Clearinghouse and downgrades that person’s license. Drivers are unable to attain their Class A CDL without completing a yearlong return-to-duty program.
This rule could remove more than 177,000 drivers from the market. While that may seem like a substantial number, it’s actually a small fraction of the market. And those brokers and 3PLs that are consistently using reliable carriers with strong safety practices shouldn’t feel the impact of this too heavily, as most carriers that have strong safety programs won’t keep drivers who have failed a drug or alcohol test without completing a return-to-duty process.
If this truly is the beginning of the end and we’re headed back to equilibrium, there is a possibility that the tide could turn and carriers will look to recoup money or be more strategic with bids and acceptance of freight. Coming out of a particularly difficult market for carriers, shippers may be in for a bit of sticker shock and a more firm negotiating stance from carriers as they look to seek some casual revenge on shippers and brokers now that the pricing power is back in their hands.
Market Check. Heading up to the Pacific Northwest, Portland, Oregon, has come out of its yearlong slump. Over the past few weeks, outbound tender rejections have hit the highest levels of the year. Rejections are at 11.66%, a 485-basis-point increase week over week and climbing. The interesting thing is that outbound tender volumes have stayed fairly steady throughout October and the beginning of November, creating a capacity crunch in the market as the OTRI continues to rise.
As a result of increased OTRI and steady OTVI, spot rates are going to be elevated, possibly the highest we’ve seen all year. Shippers that have grown accustomed to strong contract carrier compliance now can expect to see that erode as spot market rates continue to rise and attract carriers looking to recoup some losses from throughout the year.
Who’s with Whom. The Southern border of U.S. and Mexico is continuing to see explosive logistics industry growth. Most recently, Averitt has said it is launching an 85,000-square-foot distribution center and fulfillment warehouse in San Antonio. Countless shippers, carriers and freight brokers are setting up and enhancing cross-border operations. Depending on what happens with any potential tariffs under the new president, the U.S./Mexico border could become increasingly popular over the next four years.
Ed Habe, vice president of Mexico sales for Averitt in San Antonio, was quoted in an article by FreightWaves’ Noi Mahoney: “Nearshoring is already increasing the demand for warehouse and logistics services across Texas, especially cities near or along the border. San Antonio is part of the I-35 corridor, the busiest freight corridor in the U.S., which extends all the way to Laredo and then all the way into Mexico.”
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