New York/Shreveport – TD Cowen and AFS Logistics have jointly released the highly anticipated Q1 2025 Freight Index report, providing critical insights and forecasts for businesses navigating the challenging freight market. This comprehensive report analyzes market performance across less-than-truckload (LTL), truckload (TL), and parcel shipping sectors, offering forward-looking predictions to help shippers and carriers optimize operations and succeed in a competitive landscape.
Amid persistent macroeconomic uncertainty, low demand and excess capacity remain the primary challenges for the freight market. The TD Cowen/AFS Freight Index serves as a beacon, attempting to cut through the fog and guide market participants. Since its launch in October 2021, the index has become an essential freight pricing prediction tool for TD Cowen's institutional clients, widely recognized for its accuracy and reliability.
Truckload: Cautious Optimism Amid Slow Recovery
The truckload market faces a complex and nuanced situation in Q1 2025. While overall demand remains flat, the report notes that rising spot rates and increased tender rejection rates indicate carriers are becoming more selective in accepting freight orders, reflecting subtle changes in market conditions. These signs suggest a slow recovery process, though a full rebound remains distant.
Notably, upward momentum in the spot market hasn't translated to contract rates, with overall market capacity still in surplus. This means shippers retain some bargaining power in contract negotiations with carriers. The report also highlights that linehaul costs per shipment have declined for the eighth consecutive quarter, reaching the lowest point in that period, though still 11.6% above pre-pandemic levels.
Looking ahead, the TD Cowen/AFS Freight Index predicts Q1 2025 truckload rates per mile will remain stable at 5.1% above the January 2018 baseline, unchanged from the previous quarter and up 0.2% year-over-year. This forecast suggests a gradual recovery, though significant challenges remain for carriers.
Opportunities and Challenges in Truckload
The report provides a detailed analysis of the truckload market's dynamics:
- Opportunities: Spot market recovery, technological innovations (TMS, FMS, AI), and sustainability initiatives offer potential advantages for carriers.
- Challenges: Weak demand, excess capacity, rising operational costs, and regulatory compliance pressures continue to squeeze profitability.
Parcel: Pricing Strategies Show Results Amid Fierce Competition
In the parcel sector, carriers' flexible pricing strategies proved effective during peak season. New "bundled" demand surcharges drove a 16.4% quarterly increase in ground parcel surcharges. Fuel surcharge adjustments also paid off, with ground parcel net fuel costs rising 4.7% despite a 4.6% drop in diesel prices.
However, fundamental issues persist: weak demand, intense competition, and aggressive discounting. While ground parcel rates showed strength (up 24.4% year-over-year in Q4 2024), express parcel rates barely exceeded pre-pandemic levels. The 2025 general rate increase (GRI) is expected to bring seasonal growth, but projected rates remain below previous highs due to discounting pressures.
LTL: Rates Hold Firm but Cracks Emerge
The LTL market has maintained stable rates, though signs suggest carriers' pricing discipline may be weakening. Unlike truckload's prolonged rate slump, LTL pricing remained elevated following Yellow Freight's bankruptcy-induced capacity crunch. However, recent data shows this discipline softening, with fuel surcharges declining faster than diesel price drops.
The index forecasts Q1 2025 LTL rates per pound will mark a fifth consecutive quarter of annual growth, though the pace continues slowing – projected at 62.4%, just 0.4% above the previous year and down 0.2% quarterly.
The Value of the TD Cowen/AFS Freight Index
The index provides critical value to freight market participants through:
- Accurate market forecasts based on historical data and macroeconomic analysis
- Identification of sector-specific opportunities and challenges
- Actionable guidance for shippers and carriers
- Enhanced market transparency
- Promotion of market health and efficiency
As the freight market continues navigating uncertainty, the TD Cowen/AFS Freight Index remains an essential tool for industry participants seeking clarity and strategic direction.