The latest TD Cowen-AFS Freight Index, a collaborative effort between New York investment firm TD Cowen Inc. and Louisiana-based third-party logistics provider AFS Logistics LLC, provides multifaceted insights into the complex freight market. The Q1 report examines how sluggish demand, excess capacity, and pricing strategies are impacting various transportation modes.
Since its inaugural release in October 2021, the index has served as a predictive pricing tool for Cowen's institutional clients, covering key segments including less-than-truckload (LTL), truckload (TL), and parcel shipping (divided into express and ground services).
Truckload: Cautious Optimism Amid Oversupply
While demand remains subdued, the index notes emerging positive signs including rising spot prices and increased tender rejection rates, suggesting carriers are becoming more selective. However, these spot market gains haven't translated to contract pricing, with the market still grappling with excess capacity.
Truckload linehaul costs declined for the eighth consecutive quarter, reaching their lowest point in that period—though still 11.6% above pre-pandemic levels. The index projects stable per-mile rates for Q1 2025, maintaining a 5.1% increase over the January 2018 baseline, essentially flat quarter-over-quarter with a modest 0.2% year-over-year gain.
Parcel: Strategic Pricing Adjustments Meet Weak Demand
Parcel carriers successfully implemented pricing adjustments during peak season, with new bundled demand surcharges driving a 16.4% quarterly increase in ground parcel surcharges. Continued refinements to fuel surcharge tables also proved effective—ground parcel net fuel costs rose 4.7% sequentially despite a 4.6% drop in highway diesel prices.
A similar disconnect appeared in express parcels, where Gulf Coast jet fuel prices fell 8.8% quarterly while carrier fuel surcharges declined just 2.7%. UPS implemented its eighth 2024 fuel surcharge adjustment in December, this time modifying the fee curve to accelerate surcharge increases during price spikes while slowing decreases during declines.
Despite these pricing maneuvers, underlying market conditions remain challenging. Q4 2024 saw express parcel per-piece rates decline both quarterly and annually, with the index just 0.5% above its January 2018 baseline. While Q1 2025 is expected to show seasonal growth from general rate increases (GRIs), the projected 4.1% increase represents a year-over-year decline due to aggressive discounting.
Ground parcel performance proved stronger, with per-piece rates growing both quarterly and annually to reach 24.4% in Q4 2024. With 2025 GRIs taking effect, Q1 is projected to reach 28.2%, though still showing slight annual declines from peak levels two years prior.
Less-Than-Truckload: Pricing Discipline Shows Early Cracks
While LTL rates remain elevated compared to truckload's sustained slump—boosted by Yellow Freight's bankruptcy-driven capacity tightening—recent data suggests carriers' pricing discipline may be weakening. Q4 2024 saw LTL linehaul costs drop 1.3% quarterly, significantly outpacing a mere 0.3% decline in shipment weight.
This softening appears particularly evident in fuel surcharges. Unlike parcel carriers' strategic management of fuel fees, major LTL carriers saw average fuel surcharges drop 3.4% quarterly, with actual net fuel surcharges per shipment falling 5.5%. The index projects Q1 2025 LTL per-pound rates will mark the fifth consecutive quarter of annual growth, but the pace continues slowing—the projected 62.4% increase represents just 0.4% annual growth and a 0.2% quarterly decline.