Trucking operators are expected to face bearish market conditions through the first half of this year, according to Uber Freight’s first-quarter update on global freight markets.
Truckload supply has continued to outstrip demand, which Uber attributes to “plunging imports and lower consumer spending”. As a result, market weakness is expected to continue in the first half of 2023. “Freight demand transitioned from a spot market recession to a broad-based volume recession,” Uber pointed out.
Imports, retail sales, and manufacturing output all declined in the fourth quarter. The Institute for Supply Management’s PMI reading lowered from 49 in November to 48.4 in December, indicating weak future demand.
Also looming is the possibility of a tighter market in the latter half of the year. The pace of trucking capacity exiting the market is accelerating as smaller operators are caught between high costs and low rates. “While we expect demand to fall further in H1, we also expect supply to contract further,” the analysts said, referencing the contracting pool of independent U.S. truckers.
According to Uber analysts, intermodal volumes have been down in 16 out of the past 17 months and are forecast to continue to decline for much of 2023. Meanwhile, truckload operators will continue to maintain pricing pressure on intermodal players in the coming months. As a result, little change is expected for the intermodal sector and robust growth will likely not occur before next year.
The LTL sector outperformed truckload and intermodal providers yet faced an overall decline of -7% in U.S. LTL volumes. Weakening demand in a previously tight market has opened up capacity, but shippers hoping for more advantageous pricing from their LTL providers will likely be disappointed.
Uber analysts note that actual increases are consistently higher than shipper expectations. “Historical patterns predict that it is strongly likely shippers will experience higher increases than their expectations,” they warned. “We anticipate contractual renewal increases will continue to decline, sitting in the 3%-5% range through, at least, June.”
Source: The Loadstar