NEW YORK — The third-quarter TD Cowen/AFS Freight Index reveals an industry grappling with prolonged challenges as carriers navigate what analysts describe as a "survival game" amid persistent overcapacity, declining rates, and ongoing tariff impacts. The joint report from investment firm TD Cowen Inc. and logistics provider AFS Logistics LLC provides a comprehensive analysis of market dynamics across truckload, parcel, and less-than-truckload (LTL) segments.
The Freight Market Balancing Act
Imagine the freight market as a massive seesaw — on one end, fluctuating capacity; on the other, carriers struggling to maintain profitability. The report, which combines AFS's multimodal shipping data with machine learning analysis, paints a picture of an industry entering its third year of a prolonged downturn.
"We're seeing carriers apply hard-won lessons from previous cycles, prioritizing profitability over growth in this challenging environment," said AFS CEO Andy Dyer. While initial tariff shocks have subsided, he noted businesses continue adjusting to policy changes while facing fundamental market pressures.
Key Findings by Transportation Mode
Truckload: The Overcapacity Dilemma
The truckload sector saw linehaul costs per shipment increase 1.5% year-over-year in Q3, ending a streak of declines. However, rates remain depressed after nearly three years of overcapacity, with Q4 projections showing per-mile rates just 6.1% above January 2018 baselines.
Regulatory changes compound these challenges. The Federal Motor Carrier Safety Administration's stricter enforcement of commercial driver language requirements removed approximately 3,000 drivers from the workforce, while electronic logging device mandates and maintenance requirements continue increasing operational costs.
Parcel: Rate Adjustments Meet E-Commerce Demands
Major carriers FedEx and UPS continue adjusting rate structures through general rate increases (GRIs) and seasonal surcharges. Q3 saw parcel costs per shipment rise 0.03% quarter-over-quarter due to higher billed weights, fuel costs, and premium service mix.
E-commerce growth creates both opportunity and strain. While parcel volumes surge, especially during peak seasons, carriers face infrastructure strain and profitability pressure from low-value shipments affected by tariff policy changes.
Less-Than-Truckload: Industrial Weakness Takes Toll
The LTL sector showed divergent trends in Q3, with cost per shipment falling 1.8% quarter-over-quarter while average shipment weight dropped 3.0%. Industrial demand softness and reduced heavy freight activity drove a 7.4% year-over-year decline in shipment weights.
Carriers maintained cost discipline (with costs down just 0.7% year-over-year) but faced pressure from a 5.6% increase in average fuel surcharges and 1.3% longer average hauls. The Q3 LTL freight index reached a record 65.1%.
The Path Forward: Efficiency and Adaptation
The report concludes that carriers across all modes must focus on operational efficiency, technological adoption, and strategic flexibility to weather current conditions. Those able to optimize networks, implement cost controls, and differentiate services will be best positioned for eventual market recovery.
As the freight market's prolonged downturn continues, the "profitability battle" increasingly resembles a war of attrition — with carriers' survival depending on their ability to do more with less while awaiting macroeconomic improvements.