The Current State of Logistics: Q3 Pricing Update

Q3 Logistics Pricing Update

Truckload Rates

The truckload market is poised for moderate changes in the near future. According to FTR Transportation Intelligence, truckload spot rates are projected to rise by 6.5-7% in 2025, following a modest increase of approximately 1% in 2024. This anticipated growth in spot rates comes after a significant dip, with spot rates hitting a four-year low in the second quarter of 2024.

Loadings for truckload shipments have been steady, with a slight overall increase of 0.2% anticipated for 2024. Looking ahead, loadings are expected to rise further in 2025, with dry van and refrigerated loadings projected to increase by 1.5% and 2.6%, respectively. This uptick in loadings is expected to support the truckload market's recovery and growth.

US Diesel Pricing Update

Diesel prices have decreased to their lowest levels since October 2021, which has somewhat alleviated the pressure on carriers' margins. Currently, the national average diesel price stands at $3.555 per gallon, a notable drop from the previous year.

Although this decline in fuel costs has helped stabilize margins, truckload contract rates are expected to fall 3.5% within 2024's runrate before rebounding by 3% in 2025.

Less-Than-Truckload (LTL) Rates

The LTL sector is experiencing a more stable trajectory compared to truckload rates. FTR forecasts a 1.6% increase in LTL rates for 2024, followed by an additional 2% rise in 2025. This gradual growth reflects a relatively stable market with consistent loadings and operational adjustments. Unlike the truckload market, which has seen more pronounced fluctuations, the LTL sector's steady rate increases indicate a more balanced supply and demand dynamic.

International Shipping Rates

The logistics and maritime sectors are facing potential disruptions due to looming labor disputes that could significantly impact port operations across the U.S. East and Gulf coasts. With labor contract negotiations stalled and tensions escalating, the threat of a labor strike looms large, raising concerns about the potential economic fallout and operational adjustments needed to navigate these challenges.

The International Longshoremen’s Association (ILA) and the United States Maritime Alliance (USMX) are currently at an impasse in their contract negotiations. With only two weeks remaining on their existing contract, the likelihood of a strike is increasing. The primary sticking points in these negotiations include wage increases and port automation, both of which have become contentious issues. The ILA's concerns about automation and its impact on job security are central to the dispute, with some speculation suggesting that a strike could target specific terminals, such as those operated by Maersk in Mobile, Alabama.

A strike by dockworkers at East Coast and Gulf ports would be the first of its kind in nearly fifty years. Such an action could lead to significant disruptions in port operations, impacting the flow of goods and causing delays across the supply chain. The USMX's bylaws stipulate that a strike at one port could trigger a lockout across all their ports, amplifying the potential for widespread operational halts.

The economic impact of a prolonged strike is a major concern for both maritime operators and the broader economy. The White House, especially in an election year, faces a delicate balance between supporting labor rights and mitigating the economic consequences of a shutdown. The administration's response to a strike could range from intervening to end the strike via the Taft-Hartley Act to allowing the strike to proceed but with limitations on its duration.

Taft-Hartley Act of 1947

The Taft-Hartley Act of 1947 regulates labor unions by restricting certain union activities, such as secondary boycotts and jurisdictional strikes, and allows states to implement "right-to-work" laws. It also mandates transparency in union operations and provides the President with the authority to intervene in labor disputes that threaten national security or public welfare. The Act aims to balance labor-management relations and has been a significant, though controversial, piece of labor legislation in the U.S. The Act has been controversial, with supporters arguing that it provides necessary checks on union power and helps maintain labor market stability. Critics, however, contend that it weakens the power of unions and undermines workers' rights to organize and advocate for their interests. However, there is a strong expectation that the administration would prefer to resolve the dispute swiftly to avoid severe economic disruptions.

*Sourced via FreightOS

In anticipation of potential disruptions, ports and ocean carriers are already making contingency plans according to the Journal of Commerce. Some East Coast ports are already beginning to wind down operations, preparing for the possibility of a strike. This proactive approach aims to mitigate the impact of any disruptions and ensure that essential goods continue to move through the supply chain as smoothly as possible. The possibility of a strike introduces uncertainty and potential economic impacts that could ripple through the maritime and logistics sectors. As both sides remain entrenched in their positions, the industry must prepare for various scenarios, including potential operational disruptions and shifts in trade patterns.