Spot rates may have hit bottom, owner-operators and small fleets say

A survey of owner-operators and small fleets conducted in the fourth quarter of 2023 shows that most respondents believe that current trucking freight demand has reached its bottom, according to research from Truckstop and Bloomberg Intelligence.

“The worst may be near for the North American truckload spot market,” Lee Klaskow, senior freight transportation and logistics analyst at Bloomberg Intelligence, said in a release. “Capacity could drop as rates hover near or below operating costs, which is crucial for the spot market to reach equilibrium.” 

The survey included replies from 148 respondents, consisting of dry-van, flatbed, temperature-controlled and specialized/diversified, hot-shot and step-deck carriers. Of the respondents, 52% operate just one tractor.

Specifically, the Bloomberg / Truckstop 4Q23 Truckload Survey shows: 

• Demand challenges may have hit bottom: Demand remained pressured in 4Q as 68% of respondents noted lower volume and 23% reported loads were flat. Most respondents appeared to believe that current demand has reached its low point, with 40% predicting flat volume over the next 3-6 months, 10 percentage points higher than in the 3Q survey.
• Carriers are still reluctant to buy additional tractors, with only 14% saying they might make a purchase over the next six months. Weak demand was cited by 44% as the main reason for not buying equipment.
• Spot rates may have hit bottom: Most carriers believe that spot rates excluding fuel surcharges are bouncing along a bottom, with an average 14% drop for respondents in 4Q. Such rates likely will remain flat in the next 3-6 months, according to 46% of respondents, while 32% anticipate declines and 22% expect improvement.
• Carriers remain resolute: Loads dropped an average of 13% in 4Q amid a soft economy and tough comparisons. This has created uncertainty for many owner operators, with 43% unsure about their status in six months and 12% looking to leave the industry.

Those results echo another trucking sector report, as the transportation analyst group FTR said that its Trucking Conditions Index for December fell to a reading of -4.31 from -1.35 in November. 

Although December’s TCI was weaker than November’s index, it otherwise indicated the least negative overall market conditions for carriers since May. Causes for the continued negative trucking climate includes a higher cost of capital and a deterioration in freight rates, FTR said. And those conditions are expected to continue, as FTR’s outlook remains below neutral market conditions through 2024.

One silver lining to the slump is that it may squeeze excess capacity out of the sector, trading short term pain for long term gain, but that turnover will still take time. “We finally see indications that larger carriers are no longer absorbing the bulk of driver capacity displaced by failing small carriers, suggesting a steady tightening of capacity that eventually could spark a turn in the market,” Avery Vise, FTR’s vice president of trucking, said in a release. “If the recent upturn in diesel prices continues, the capacity drain among small carriers might accelerate. Even so, the industry will need stronger freight demand, and we still don’t see any significant inflection in volume until at least the second half of this year.”