The freight transportation industry enters 2025 with cautious optimism, according to the latest TD Cowen/AFS Freight Index Q1 report. After enduring what analysts describe as "a prolonged winter" of depressed demand, excess capacity, and volatile pricing throughout 2024, early indicators suggest potential stabilization across key market segments.
Market Overview: From Contraction to Stabilization
Since its inception in October 2021, the TD Cowen/AFS Freight Index has served as a critical benchmark for pricing trends in less-than-truckload (LTL), truckload (TL), and parcel shipping (divided into express and ground services). The quarterly report combines AFS Logistics' extensive transactional data with machine learning analysis to provide forward-looking assessments.
"While macroeconomic indicators show tentative improvement, the fundamental forces shaping 2024's freight market continue to influence near-term conditions," noted AFS CEO Andy Dyer. "Absent demand-side catalysts, carrier exits haven't yet sufficiently reduced capacity to offset persistent softness."
Sector-by-Sector Analysis
Truckload: Early Green Shoots Emerge
The truckload market shows modest improvement after eight consecutive quarters of declining per-shipment costs, which remain 11.6% above pre-pandemic levels. Spot rate increases and rising tender rejection rates suggest tightening capacity, though contract rates show no parallel momentum.
The index forecasts flat per-mile rate performance in Q1 2025—5.1% above the January 2018 baseline—reflecting ongoing equilibrium between supply and demand.
Parcel: Strategic Pricing Offsets Discount Pressure
Parcel carriers demonstrated pricing discipline during peak season, with ground service accessorial fees jumping 16.4% quarter-over-quarter. Fuel surcharge adjustments outpaced diesel price declines, yielding 4.7% higher net fuel costs despite a 4.6% drop in diesel prices.
However, aggressive discounting continues to pressure yields. While ground parcel rates reached 24.4% above baseline in Q4 2024 (projected to rise to 28.2% in Q1 2025), express parcel rates barely exceeded pre-pandemic levels at just 0.5% above baseline.
LTL: Pricing Discipline Shows Cracks
The LTL market maintained relatively firm pricing following Yellow Freight's 2023 bankruptcy, but Q4 2024 saw per-shipment costs decline 1.3%—exceeding the 0.3% reduction in shipment weight. Fuel surcharges dropped 3.4% sequentially, signaling potential erosion in carrier pricing power.
The index projects LTL rates will maintain a 62.4% premium over baseline in Q1 2025, though year-over-year growth continues decelerating to just 0.4%.
Looking Ahead
The report suggests the freight market remains in a transitional phase, with pockets of stabilization emerging amid broader challenges. While no segment shows signs of robust recovery, the data indicates the steepest declines may have passed, setting the stage for potential gradual improvement later in 2025.