State of the Industry Report December 2022
Industry Insight from RXO Experts
Procurement Market Update
RXO feels that the theme for 2023 will continue to be a downward trend in TL contract rates after 2022, which saw spot pricing decline almost 40% until Q4 when it plateaued. This is typically a lead indicator for contract rates to follow, which they have over the past few months as shippers have had the upper hand. This was evident by the significant number of RFQ’s to hit the street in Q4. One very important factor to consider is that even though spot rates have fallen significantly over the past year, they are still at or slightly above pre-pandemic levels. LTL pricing discipline remains strong after double digit percentage increases in 2022 with an expected decline of only 3-5% in 2023 year-over-year. LTL service overall seems to be getting better but still has plenty of room to improve.
There is a lot of uncertainty in the market based on economic headwinds, but with high inventory ratios and consumer demand stagnating, we predict that rates will continue to trend downward and that capacity will be readily available throughout 2023. Visibility will continue to be a strong focus for RXO through system integrations and technology-based solutions with our providers and customers.
RXO Joins Women in Trucking Association
RXO has joined the Women in Trucking Association as a corporate member, partnering with the non-profit to empower women to join and succeed in the trucking industry.
Drew Wilkerson, chief executive officer at RXO, said, “We’re thrilled to become a corporate member of the Women in Trucking Association, an organization whose mission closely aligns with RXO’s values. They do pivotal work to promote gender diversity and inclusion in a traditionally male-dominated field. As we grow RXO, we’re committed to empowering women to make their mark across every level of our business.”
Top Industry News
Transportation Prices Fall at Fastest-Ever Pace in December, LMI says
The Logistics Managers’ Index (LMI), a monthly survey of supply chain executives, displayed a 36.9 reading for transportation prices during the month. The rate of decline was the fastest recorded in the six-year history of the data set. A reading above 50 indicates expansion while one below that indicates contraction.
Transportation utilization (48.1) fell into contraction territory for the first time since April 2020, while transportation capacity (69.5) expanded at a historically high but more tepid pace.
Fresh Fragility in Global Trade Set to Be Revealed in 2023
A pandemic-fueled supply crunch, Russia’s war with Ukraine, and a deepening rift in the U.S.-China trade relationship have hammered home the idea that the world needs more resilient trade networks. As these supply chain shocks begin to dissipate this year, the next fragility to be exposed will reveal how outdated the global trading system is in an era where the world’s largest nations are stepping back from the founding principles of globalization. Learn five ways that global trade will transform in 2023.
US and Global Macroeconomics
Transformational Deals in Trucking During 2022
FreightWaves: Deal flow in the transportation and logistics space slowed notably in 2022 as the economy cooled. Investors have become more risk averse, minimizing exposure to companies with less-proven track records, as interest rates have soared and credit markets have tightened.
Crude Tanker Rates Down Double Digits after Russia Sanctions Debut
FreightWaves: Spot rates and share prices fall in wake of restrictions on Russia.
The Largest Trucking Companies that Went Bankrupt in 2022 Freight Recession
FreightWaves: The largest trucking bankruptcy was a Postal Service carrier.
Regulatory Victories Mark 2022, but New Challenges Lie Ahead
Transport Topics: As the nation began easing its way out of the COVID-19 pandemic in 2022, activity on closely watched initiatives related to the trucking workforce heated up, while efforts to advance new laws for trucking fleets kept stakeholders engaged.
Benchmark Diesel Price Reverses, Rises for First Time in 7 Weeks
FreightWaves: Retail prices finally reacted to higher futures and wholesale prices that have marked the diesel market since before Christmas. But just as that pump price has started to rise, diesel futures posted one of the biggest declines since July, depending on how it is measured.
DOE Boosts Hydrogen Efforts With $750 Million in Funding
Transport Topics: DOE has designated hydrogen produced with net-zero carbon emissions as “a key pillar in the emerging clean energy economy” that is essential to meet Biden’s goal of a 100% clean electrical grid by 2035 and net-zero carbon emissions by 2050.
Truckload and LTL
Contract Becomes the New Spot Freight
Looking into the future, as contract rates inevitably fall closer to spot market levels, compliance rates will be more likely to fall and OTRI increases. For this reason, transportation managers should not expect this level of compliance to become the norm but potentially the best achievable result.
Demand side conditions look grim through the winter. The supply side of the equation is due for a historical correction in 2023 if this does not change, meaning the market will once again become exposed to destabilization from demand surges — and the cycle continues.
FTR Trucking Conditions Index Drops to Lowest Level in More than Two Years
“We do not see a month on the horizon as difficult as October was for trucking companies, but nor do we expect much for carriers to get excited about,” said Avery Vise, FTR’s vice president of trucking, in a statement. “The rate environment looks to keep market conditions at least mildly negative into 2024. Plunging diesel prices obviously are bolstering financial conditions in the near term, and the hit from financing costs likely will begin moderating by mid-2023. Those costs have disproportionately hurt smaller carriers recently, and improvements in those situations likewise will not help larger carriers as much as smaller ones.”
Infrastructure and Regulation
Expect to Hear more about Rail Service Issues in 2023
- The Surface Transportation Board’s regulatory to-do list, train crew sizes and merger conditions related to Canadian Pacific’s acquisition of Kansas City Southern are just some of the big issues that rail industry stakeholders will be watching in 2023.
- One of the biggest issues that the U.S. freight industry will tackle is how to improve rail service. Closely related to that are the potential actions that STB could take to address that issue.
Ports Close Out Year of Change; Infrastructure on Tap in 2023
As 2022 closed, a significant shift took place at America’s ports. Until late summer, Los Angeles’ was the busiest in the nation, but that honor now belongs to the Port Authority of New York and New Jersey.
FMCSA Exempts Deaf Drivers Despite CVTA Objections
The Federal Motor Carrier Safety Administration stated that it had evaluated the applicants’ eligibility “and determined that granting exemptions to these individuals would likely achieve a level of safety that is equivalent to, or greater than, the level that would be achieved by complying with” federal regulations.
Cross-border: Mexico, Canada and International
Xometry CEO Predicts Expanded Manufacturing in U.S.
Cross-border trade between Mexico and the U.S. is expected to remain strong next year but still could be affected by everything from driver shortages to the north/south freight imbalance to the weakening peso.
U.S.-Mexico Trade Growth to Remain Steady in 2023, Bolstered by Nearshoring
Cross-border freight volumes will continue to increase in 2023, experts say.
Real-time Visibility: New Year, Same Lean Strategy
Entering 2023, shippers of all sizes will turn to their visibility partners to provide an even deeper understanding of their supply chains, hoping to reverse the previous year’s inventory mistakes and provide better on-time experiences for end consumers. The question is: Are visibility leaders up for the challenge?
Shift to EVs Triggers Huge U.S. Factory Building Boom
The automotive sector’s shift to electric vehicles is helping drive one of the biggest factory-building booms in the U.S. in years, according to multiple news sources.
Taiwan Export Orders Flash Warning Signal for Global Economy
Taiwan’s export orders plummeted by the most since the height of the global financial crisis more than a decade ago, a sign of worsening global demand for technology products.
Class I Railroads Earn Environmental Accolades
A number of Class I railroads have recently earned recognition for efforts to follow guidelines promoting environmental, social and governance (ESG) values. Rail technology provider Wabtec also received accolades for its battery-electric locomotives.
The Dow Jones Sustainability North America Index (DSJI) named CSX (NASDAQ: CSX), Canadian Pacific (NYSE: CP) and CN (NYSE: CNI) to its annual list of companies to achieve high scores on S&P Global’s Corporate Sustainability Assessment (CSA).
Recruitment Normalizes After Freight Surge Slows
Recruitment trends in trucking began returning to more normalized levels after a frenzied start to 2022 that was very much influenced by the COVID-19 pandemic.