Check Call: The end of a bad era in the freight market

It’s the end of an era – the era of the freight recession. There are rumors that this could be the beginning of better times. Not that we want a repeat of the market madness of 2020, but dare I say a return to normality is in our future for early 2025?

What is the reason for the view that the freight recession is over? Well, that would be the rising tender rejection rates. Craig Fuller, CEO of FreightWaves, said: “After a decisive election, I believe the freight market is recovering and could exceed expectations next year.”

The increase in tender rejection rates at this time of year is not atypical as it is peak season. However, the continued rise above the 2022 and 2023 levels suggests that this may be the turnaround the market is looking for.

The impact of the Federal Motor Carrier Safety Administration’s Clearinghouse II regulation next Monday is also likely to contribute to the increase in demand. Essentially, this new rule will remove any person with a Class A CDL license in prohibited status from the Clearinghouse and downgrade that person’s license. Drivers cannot achieve their Class A CDL without completing a year-long return-to-duty program.

This rule could take more than 177,000 drivers out of the market. While this may seem like a significant number, it is actually a small fraction of the market. And those brokers and 3PLs that consistently use reliable carriers with strict safety practices should not feel the impact of this too strongly, as most carriers with strict safety programs will not retain drivers who have failed a drug or alcohol test without a test to carry out return to duty process.

If this is truly the beginning of the end and we are moving back towards equilibrium, there is a possibility that the tide will turn and carriers will look to recover money or become more strategic in offering and accepting freight. After a particularly difficult market for shippers, shippers are likely to be in for a bit of a shock and will see a more assertive negotiating stance on the part of shippers as they look to casually take revenge on shippers and brokers now that pricing power is back in their hands.

Market check. Heading to the Pacific Northwest, Portland, Oregon, has broken out of its years-long doldrums. In recent weeks, rejections of outgoing tenders have reached their highest level of the year. Rejections stand at 11.66%, up 485 basis points week-over-week and continuing to rise. The interesting thing is that the volume of outgoing tenders has remained fairly constant in October and early November, which has led to a shortage of capacity in the market, while the OTRI continues to rise.

Due to elevated OTRI and stable OTVI, spot interest rates will rise, possibly the highest we have seen all year. Shippers who have become accustomed to strict carrier compliance with contractual obligations can expect this to ease as spot market rates continue to rise, attracting carriers looking to recoup some losses during the year.

Who is with whom? At the U.S.-Mexico southern border, the logistics industry continues to experience explosive growth. Most recently, Averitt announced it would open an 85,000-square-foot distribution center and fulfillment warehouse in San Antonio. Countless shippers, carriers and freight brokers are building and improving cross-border businesses. Depending on what happens with potential tariffs under the new president, the U.S.-Mexico border could become increasingly popular over the next four years.

Ed Habe, vice president of Mexico sales at Averitt in San Antonio, was quoted in an article by FreightWaves’ Noi Mahoney: “Nearshoring is already increasing demand for warehousing and logistics services across Texas, particularly in cities near or along the border.” San Antonio is part of the I-35 corridor, the busiest freight corridor in the U.S., extending to Laredo and then into Mexico.”

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