As we approach the end of 2024, the freight industry is experiencing a notable shift. The “Great Freight Recession,” a term that has characterized industry discussions for the past two years, is drawing to a close. This shift in market dynamics creates both opportunities and challenges, particularly for shippers who are currently navigating or preparing their Request for Proposals (RFPs) for 2025 and beyond.
The Market’s Turning Point
Recent data indicates a clear upward trend in truckload spot rates and tender rejection rates. This shift signals a tightening market, with carriers regaining some leverage in negotiations.
As shown in the chart above, the Outbound Tender Rejection Index (OTRI.USA) has been trending upward, signaling that carriers are becoming increasingly selective about the loads they accept.
Comparing year-over-year data reveals a notable progression: from November 2022 to November 2023, the average rejection rate was 3.6%. In the subsequent period, from November 2023 to November 2024, the average rejection rate increased to 4.6%. Currently, the rejection rate for truckload freight stands at 6.4%, underscoring the tightening market conditions.
The Narrowing Spread
The spread between contract and spot rates is narrowing, suggesting that the era of rock-bottom pricing may be behind us.
The chart above illustrates the narrowing gap between contract and spot rates (RATES.USA). During the COVID-19 pandemic, this spread inverted, with spot rates commanding a premium over contract rates—an unusual market condition. In the following year, as capacity flooded the market, we observed the spread widen to an all-time low, with spot rates discounted by $0.94/mile compared to contract rates. Now, as this spread returns to historical norms, shippers may need to reevaluate their rate expectations and adjust their strategies accordingly.
The RFP Dilemma
For shippers, this market transition creates a critical dilemma:
- Current RFPs: Those currently engaged in RFPs face the risk of locking in rates that may soon be below market value. This could lead to increased tender rejections and potential service disruptions in the short to medium term.
- Upcoming RFPs: Shippers who are planning to launch their RFPs in 2025, or who may be delaying their current processes, might encounter a significantly different market landscape, potentially facing higher rates and reduced carrier availability.
Contract and Spot Market Trends
To further illustrate the changing market conditions, let’s look at the van contract and national truckload index.
The Van Contract – Initial Reporting (VCRPM1.USA) shows the current trend in contract market rates. The National Truckload Index (NTI.USA) shows the current trend in spot market rates. The curling upward movement in both suggests that shippers delaying their RFPs may face higher rates in the near future.
Navigating the Changing Tides
In this dynamic environment, making informed decisions is more crucial than ever. Shippers need high-frequency, accurate data to:
- Assess current market conditions
- Forecast future trends
- Optimize their RFP strategies
- Adjust their approach as the market evolves
This is where tools like SONAR become invaluable. With its comprehensive, near-real-time market insights, SONAR equips shippers with the intelligence needed to navigate these changing tides effectively.
Key Considerations for Shippers
- Market Awareness: Stay informed about the latest market trends and indicators.
- Flexible Strategies: Be prepared to adjust your RFP approach based on real-time data.
- Balanced Negotiations: Aim for rates that are fair and sustainable for both parties to ensure long-term reliability.
- Continuous Monitoring: Use tools like SONAR to keep a pulse on market changes even after your RFP is complete.
Looking Ahead
As we move into 2025, the freight market is poised for continued evolution. Shippers who arm themselves with robust market intelligence and adaptable strategies will be best positioned to thrive in this new landscape.
Remember, in a market as dynamic as freight, timing and information are everything. Make sure you’re equipped with the right tools to make informed decisions in these crucial times. SONAR’s high-frequency data and analytics can provide the edge you need to navigate the complexities of the current market and optimize your RFP process.
Closing Thought: Strategic Pricing in a Shifting Market
In today’s volatile freight environment, rock-bottom pricing is no longer a sustainable strategy. When engaging with carrier partners pricing above market rates, seek understanding. A carrier who can articulate thoughtful insights about changing market conditions demonstrates strategic foresight. As tender rejection rates continue to rise, shippers will increasingly value carriers with the capacity and pricing flexibility to navigate market uncertainties.
The most successful partnerships will emerge from mutual understanding of market dynamics—where both shippers and carriers recognize the value of adaptable, intelligent pricing strategies.
