Falling freight demand shapes 2022 outlook

If you haven’t read the article that FreightWaves’ CEO Craig Fuller wrote last week titled, “Just 3 years after 2019 trucking bloodbath, another is on the way,” we recommend starting there. 

In this report, we add to the discussion with additional SONAR highlights and what a coming downturn in the freight market means for other modes.   

The truckload market has come under pressure as consumers are not only faced with significant inflationary pressures but also a shift back to services and experiences after purchasing goods for the past 24 months. Volume levels and rejection rates are at their lowest level in over 18 months, causing spot rates to plummet despite higher fuel costs. Rising insurance, maintenance and fuel expenses are squeezing carriers’ margins in the face of falling revenue, which foreshadows a bleak near-term future for the market.

A drop in freight demand could have an initial neutral to positive impact on intermodal volume and service levels before intermodal volume ultimately declines. An initial intermodal volume boost could come from reduced congestion and better container turn times, which would lead to improved container availability. In March, intermodal demand held up while dry van demand declined. As more time passes, the intermodal and dry van segments will be in greater alignment, which could lead to overcapacity in intermodal as well. 

The ocean market is a little better insulated from the boom and bust cycles that the truckload market faces. This is because there are a limited number of carriers that control ~90% of the market. Demand on the ocean hasn’t faced a slowdown but the market faces increased geopolitical uncertainty as well as shutdowns in the largest exporter in the world.