Truckload Rates Head for Their Highest Level Since Early 2022 While Demand Barely Moves: Cass Linehaul Up 10%, AFS Sees a Record-Cost Q4, and the IEA Says the Diesel Squeeze Lasts Well Into 2027

On Tuesday, October 13, AFS Logistics and TD Cowen published their fourth-quarter freight index and Cass Information Systems released its September freight data. On Wednesday the International Energy Agency put out its October Oil Market Report. Read together, they say truckload pricing is back where it was in the first quarter of 2022, the tail end of the pandemic boom, except that this time freight volumes are barely growing. The AFS report projects the highest truckload rates since Q1 2022, LTL rates more than 80% above their January 2018 baseline for the first time, and the most expensive parcel shipping year on record. Cass' truckload linehaul index, which strips out fuel and accessorial surcharges, rose 10.1% from a year ago in September to its highest absolute reading in four years, while the shipments index grew 1.9%. The IEA, meanwhile, expects 'constrained middle distillate supplies likely to persist well into 2027.' AAA's national diesel average was $6.2997 a gallon on Wednesday, 23 cents below the September 22 record of $6.5276 and about $2.64 above a year ago.

The numbers: contract rates are catching up to spot

Cass' linehaul index was up 0.6% from August and has risen year over year for 21 straight months. The report notes that spot rates have pulled back seasonally and that there are fewer contract bids at this time of year, but 'even as spot rates slow with modest sequential declines, the much larger contract market is still adjusting higher.' Cass' expenditures index, which includes fuel, jumped 20.4% from a year ago and 6.7% from August, with diesel up 68% year over year in September. FreightWaves' SONAR Pricing Power Index for the week of October 12 came in at 70 on a 0-to-100 scale where 50 is balanced, its fourth weekly decline but still firmly in carriers' favor. Truckload tender rejections held at 13.85%, about two and a half times the level of two years ago; van contract rates rose to $2.74 a mile, in the 84th percentile of their five-year history, while spot rates have come off their early-July peak of $3.80, leaving the spot-to-contract spread at minus 11 cents. DAT's weekly report for October 4 to 10 showed broker-to-carrier spot averages of $3.12 a mile for vans, $3.68 for reefers and $3.68 for flatbeds, including fuel; linehaul rates rose for all three types and, according to DAT analyst Dean Croke, sit roughly a third above last year: van up 35%, reefer 33%, flatbed 29%. Load posts fell 18% after the quarter-end push, but truck posts on DAT One remain more than 20% below a year ago, and load-to-truck ratios of 10.5 for vans, 16.8 for reefers and 36.6 for flatbeds compare with 6.3, 10.7 and 27.2 a year earlier.

Why: fuel and a shrinking pool of trucks, not demand

Every one of the reports points at the same two forces. 'We expect fuel to drive elevated transportation costs for the foreseeable future. Inventories are low and refineries are at capacity, so even if crude oil prices drop in the coming months, diesel and jet fuel supplies must still catch up before prices recede,' said AFS Logistics CEO Andy Dyer. 'The other key force shaping freight markets is capacity. The holiday rush always places a seasonal premium on parcel capacity, while the continued ascent of truckload rates is the result of steady demand chasing a shrinking pool of trucks.' FreightWaves, reporting the Cass data, says the dataset 'confirms the impact strict regulatory enforcement is having on non-compliant capacity,' and notes that truckload executives at an investor conference last month said they expect the regulatory crackdown to remove thousands more unsafe operators. On the demand side the picture is modest but positive. Cass' shipments index has now grown year over year for two months after 42 months of declines, helped by inventory restocking as container imports surge, and the ISM manufacturing index has been above 50 for nine straight months, at 54.5 in September. In LTL, AFS notes, the fuel surcharge still tracks diesel closely, so elevated fuel plus disciplined carrier pricing is what pushes rates past the 80% mark; in parcel, carriers have re-indexed fuel surcharge tables repeatedly since 2021, so the surcharge will not fall much even if fuel does.

What to watch next

Earnings season for trucking opens Thursday, October 15, when J.B. Hunt reports after the close. Werner has already guided to a 10% to 13% year-over-year increase in rate per total mile in its one-way fleet for the third quarter. Bid season is where the AFS and Cass numbers get locked in: carriers told investors they are negotiating from strength, and SONAR's three-month outlook for its pricing index is 76, above today's 70, with tender rejections projected to reach the 93rd percentile of their history by mid-January. The near-term spot forecast is flatter. DAT's 35-day RateCast has van linehaul easing to about $2.23 a mile by mid-November, reefer edging up to $2.77 and flatbed easing to $2.59. Cass expects its shipments index to rise about 4% year over year in October and its expenditures index about 23%. The wild card is fuel: diesel has eased from its late-September peak, with EIA's average down from $6.529 to $6.199 by October 5 and AAA's from $6.5276 to $6.2997, though AAA has been flat for the past week. DAT notes the drop is already trimming fuel surcharges by a few cents a mile, but every report published this week assumes diesel stays expensive through the winter.

The last time truckload rates were at this level, in early 2022, the market was coming off a pandemic freight boom. This time, by Cass' count, volumes are up a couple of percent and the trucks are leaving anyway, pushed out by diesel above six dollars and by regulatory enforcement. That is a different kind of upcycle, and every report published this week treats it as the starting point for 2027 pricing.