After attending ACT Research's Market Vitals: The Current and Future Health of the Market Seminar 71 on August 21-22, 2024, Brett Lankford from Fetch Freight and Tim Denoyer from ACT Research shared their insights on the Class 8 market, the impact of private fleets on out-of-cycle order volumes, current economic conditions, and what these trends mean for rate recovery and the truckload cycle.
Scroll down to read the full conversation between Brett and Tim.
1. Resilience in Demand, but Stagnation in Freight
Despite ongoing challenges, demand in the freight sector has shown remarkable resilience, largely driven by strong consumer spending. However, the freight market itself hasn't seen much movement. One major reason is the rapid growth of private fleets. Many companies are investing heavily in their own transportation networks, which has led to a significant shift in volume away from the spot market. Private fleets often have more favorable cost structures, allowing them to operate more aggressively than traditional for-hire carriers.
Another factor contributing to the stagnant market is the low price of used trucks. As the cost of acquiring used equipment continues to drop, more owner-operators are returning to the market, increasing capacity and further complicating the supply-demand balance. This dynamic is making it harder for rates to recover and is putting pressure on smaller carriers.
2. Truck Orders: Preparing for 2025
The industry is at a critical juncture as truck orders for 2025 are about to be finalized. While prices are being set and order books are expected to open soon, sentiment remains cautious. This hesitation could actually benefit the spot market in 2025 by signaling a potential slowdown in production. A reduction in manufacturing would help stabilize the market and reduce excess capacity.
On the equipment side, inventories are rising, and the flow of new orders is beginning to slow. Truck manufacturers are approaching a turning point where they may need to scale back production. While this could be tough for suppliers and OEMs, it could lead to much-needed relief for freight rates. As fleets share more updates, it’s becoming clear that this production slowdown is likely coming soon. This shift is part of the natural cycle in the freight market, and while it may bring short-term challenges, it sets the stage for a more balanced and healthier market in 2025.
3. Emissions: A Growing Concern
Emissions regulations are once again gaining attention in the industry. Although progress has been made, it's still moving at a slow pace. Companies are preparing for these rules to become a central topic in future discussions about the freight cycle. Compliance with stricter standards will require investment and planning, especially for fleets operating older equipment.
4. A Long Downturn and Market Correction
The for-hire segment of the freight market has been in a prolonged downturn. However, as the market adjusts, the basic principles of supply and demand are still at play. Excess capacity must be addressed, and this correction is necessary to bring the industry back into balance. As supply begins to rationalize, carriers and providers should see some relief, creating a better environment for long-term growth.
In summary, the freight market is currently facing a period of stagnation and oversupply. But with the resilience of the industry, strategic shifts in truck manufacturing, and evolving emissions policies, there is hope for a meaningful recovery in 2025. Keep an eye on these developments as we continue to monitor the market closely.
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