Dive Brief:

• Truck capacity will likely stay tight through the year, according to multiple analysts. That means carriers can expect continued benefits from elevated rates in the TL and LTL sectors. 
• Rate per mile in the TL market is set to grow through the end of 2021, according to the recently launched Cowen/AFS Truckload Freight Index. On the LTL side, the report projected that rate per pound will grow sequentially in Q4, despite the fact that weight per shipment has been decreasing since March.
• Morgan Stanley said in an Oct. 6 report that sentiment in the trucking industry "remains notably hot." Industry respondents said they don't see an end to current freight conditions, and 2022 TL rates are expected to be up approximately 5.25% compared to this year.

Dive Insight:

Trucking experts said in April they didn't fear a bust in the market this year. That attitude remains, as multiple stakeholders expect continued demand.

"Commentary was overwhelmingly positive focusing on market tightness and rising rates supported by strong demand and no drivers. Capacity was front and center [in] this update as almost all respondents noted capacity tightness with little to no expectations of any loosening," according to the Morgan Stanley report.

Capacity constraints will push up prices on the LTL side, as the top 10 carriers control 75% of all LTL freight, according to the Cowen/AFS index. And the lighter loads the report noted are likely due to increasing levels of rollover parcel freight from e-commerce.

But, as demand rises and networks become overwhlemed, service decays.

A 3PL commented to Morgan Stanley that tightness in the LTL sector had caused "many missed pickups." The Cowen/AFS report said LTL service levels have deteriorated by 7.3% so far this year.

Decaying service comes even as carriers increase rates through general rate increases or account-specific reviews, the Cowen/AFS report continued. Trucking firms are also levying surcharges on "undesirable freight," it said.

Multiple respondents in Morgan Stanely's report cited port congestion on the West Coast as a contributing factor to the supply chain chaos. But as shippers look to avoid those bottlenecks, import volumes at major East Coast ports are now rising.

The ports in New York/New Jersey; Virginia; Charleston, South Carolina; and Savannah, Georgia, handled a combined 900,326 in imported 20-foot equivalent units in August, up nearly 11% compared to last year.

Port congestion and other disruptions, along with capacity issues, have pushed more freight into the spot market, according to the Cowen/AFS report. Spot rates have become more volatile than contract rates.

"Seeing many shippers looking for dedicated capacity, which has an impact on the entire network. Shippers are coming to the realization that rates will not be retracting in the last quarter and should be informing their C-Suite of the impact in 2022," one trucking professional told Morgan Stanley.

Even if trucking experts don't anticipate the elevated freight environment will change this year, the surge will have to end eventually. DAT said in a blog post last week that it expects the TL market will correct itself in some way in Q1 or Q2 of next year. But that doesn't mean it will be a bust.

"This 'correction' will most likely just be a return to normal inflationary growth rates, not a freight recession as we saw in 2019," DAT said.