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 had an insightful discussion about the state of 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 industry has shown remarkable resilience, driven largely by strong consumer spending. However, the freight market itself has remained flat. One major reason for this stagnation is the rapid growth of private fleets. More companies are investing in their own transportation networks, pulling volume away from the spot market. This shift is fueled by the cost advantages private fleets often enjoy over third-party carriers, allowing them to expand more aggressively.
Another factor contributing to the slowdown is the declining price of used trucks. As the cost of acquiring used equipment has dropped, many owner-operators have returned to the market, increasing capacity and making it harder to balance supply and demand.
2. Truck Orders: Preparing for 2025
The conversation around truck orders suggests that the industry is at a critical juncture. Prices are being finalized, and the order books for 2025 are about to open. While sentiment remains cautious, this hesitation could actually be a positive sign for the spot market. A slowdown in production might help reduce excess capacity and stabilize the market.
On the equipment side, inventories are rising, and new order flows are 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 coming. This is part of the natural cycle of the freight market, and while it may bring short-term challenges, it sets the stage for a healthier, more balanced market in 2025.
3. Emissions: A Growing Concern
Another topic that is gaining traction is emissions regulations. While progress has been made, it remains slow, and the industry is preparing for these rules to once again take center stage in the freight conversation. Compliance costs and operational changes are expected to become more significant as regulations evolve.
4. A Long Downturn and Market Correction
The freight market, especially the for-hire segment, has been in a prolonged downturn. But as the market adjusts, the fundamental forces of supply and demand are still at play. Excess capacity must be addressed, and this correction is essential for restoring balance. As supply gradually decreases, carriers and providers should see some relief, paving the way for a stronger, more sustainable future.
In summary, the freight industry is navigating a period of stagnation and oversupply. Yet, with the resilience of demand, strategic shifts in manufacturing, and evolving regulatory landscapes, there is hope for improvement in 2025. Stay tuned as we continue to follow these key developments closely.
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