As e-commerce platforms prepare for their annual Singles' Day sales frenzy, the logistics sector faces a sobering reality check. The latest TD Cowen/AFS Freight Index report paints a picture of muted expectations for this year's peak shipping season, revealing complex dynamics across truckload (TL), less-than-truckload (LTL), and parcel shipping markets.
A Comprehensive Pricing Barometer
Launched in October 2021, the index serves as a forward-looking pricing analysis tool for Cowen's institutional clients, covering key segments including LTL, truckload, expedited, and ground parcel shipping. Its strength lies in AFS Logistics' extensive freight data resources combined with machine learning analytics, providing both historical context and predictive insights incorporating macroeconomic factors and carrier rate adjustments.
"This summer saw logistics managers constantly assessing risks and developing contingency plans amid UPS labor negotiations and Yellow's bankruptcy," noted AFS CEO Tom Nightingale. "While these events pressured certain transportation markets, weak demand and current macroeconomic conditions continue giving shippers breathing room."
LTL: Post-Yellow Price Adjustments
Third-quarter LTL rates rose 2.2% year-over-year, with two-thirds of the increase attributed to linehaul charges following Yellow's collapse. The bankrupt carrier's exit shifted volumes to higher-priced competitors, while fuel surcharges jumped nearly 20% sequentially. Fourth-quarter projections show LTL rates remaining 59.3% above January 2018 baselines—marginally higher than Q3 but down 3.2% year-over-year, signaling enduring downward pressure.
Parcel: Discount Wars Amid Soft Demand
Ground parcel rates recorded their first year-over-year decline since 2019 as carriers deployed aggressive discounts to secure volume, with average per-package discounts widening by one percentage point—the largest quarterly increase this year. Despite anticipated 1.5% sequential growth in Q4 from seasonal demand surcharges by UPS and FedEx, ground rates are projected to decline 0.7% year-over-year.
Express parcel rates fell 2.3% sequentially as increased discounts (up 0.8%) and lighter billable weights (down 4%) offset a 14.6% fuel surcharge increase. The segment expects modest 1.7% quarterly growth in Q4 with 2.5% annual growth—consistent with two-year trends but suggesting limited upside.
Truckload: Excess Capacity Meets Network Efficiency
Truckload rates showed modest sequential improvement, rising from 4.3% to 4.4% above January 2018 baselines. The projected 4.6% Q4 increase aligns with muted peak season expectations. Notably, shorter hauls reduced per-shipment costs, likely reflecting shippers' logistics network optimizations and inventory management strategies.
Structural Shifts Reshape Logistics Landscape
The report highlights several transformative trends:
Persistent demand weakness across all segments reflects macroeconomic headwinds, slowing consumer spending, and inventory adjustments.
Yellow's bankruptcy accelerated industry consolidation , creating short-term rate bumps but potentially hastening a shakeout where stronger carriers absorb market share.
Price competition intensifies , particularly in parcel shipping, where discounting erodes margins as carriers fight for shrinking volumes.
Network optimization emerges as imperative , with shippers adopting data-driven approaches to streamline logistics operations—evidenced by growing short-haul volumes.
The logistics sector faces profound structural changes as e-commerce growth, shifting consumption patterns, and technological innovation redefine traditional operating models. While near-term fluctuations may occur, the industry's long-term trajectory points toward continued pressure from soft demand, pricing battles, and necessary operational transformations.