Total trucking freight costs continue to come down from last year's peaks. PHOTO by Pexels.
You can’t blame Canadian manufacturers for falling in love with the latest trends affecting their truck transportation costs.
After two years of manufacturers being tormented by supply chain disruptions and high trucking rates, we are now tilting back towards a shipper’s market. Inventory levels are higher and motor carriers are caught with extra truck capacity. That is placing downward pressure on rates.
Ken Adamo, DAT chief of analytics, told Supply Chain Drive that the decline of in trucking rates by the end of 2022 was between 25% and 30% in the U.S. Major motor carriers are telling investors they don’t expect market conditions to improve for them until at least the second half of 2023. C.H. Robinson, a third party logistics giant, is forecasting rates to be down 16% this year compared to 2022, with the market bottoming out by May.
This side of the border, the latest results published by the Canadian General Freight Index (CGFI) show the total cost of ground transportation for Canadian shippers decreased by 0.46% in November, as compared with October. The Base Rate Index, which excludes the impact of accessorial charges assessed by motor carriers such as the fuel surcharge, decreased by 0.43%.
“Overall, year over year total freight costs (domestic and cross border) continue to be well below last year’s level,” says Doug Payne, president and COO of Nulogx, whose customer database is used for the freight index.
While the CGFI reflects contract rates, Loadlink’s own index examines Canadian spot market trucking activity. The data pulled from this index is particularly instructive as to what is placing downward pressure on trucking rates right now.
January load volumes for both intra-Canada shipments and loads coming in to Canada from the U.S. are up substantially from the previous month. Intra-Canada load volumes are up 11% month over month and inbound loads from the U.S. are up a whopping 52% month to month. Normally that would be placing significant upward pressure on rates. However, as impressive as those shipment volume gains may be, they actually represent a drop in activity when compared year over year. Intra-Canada loads are down 16% year over year while inbound loads from the U.S. are down 27% year over year. Outbound loads to the U.S. – the stat reflecting Canadian exports – shows a drop in shipment activity both month over month (-2%) and year over year (-34%). In combination, while January trucking load volumes were up 22% month over month, they were down 26% year over year.
Record trucking load volumes in the first quarter of 2022 are casting a deep shadow over load volumes to start 2023.
What’s particularly problematic for motor carriers (and giving Canadian shippers the upper hand when it comes to trucking rates), particularly for cross border loads, is that while load volumes are down year over year, truck equipment postings are up. Truck equipment postings are up 37% year over year for outbound crossborder activity and up 51% year over year for inbound cross border activity. Truck equipment supply increasing at a time when load volumes aren’t capable of keeping up with last year’s record load increases is placing downward pressure on rates.
January’s truck to load ratio, which measures how many trucks are available for each load posted, was a decent 1.76 in January. Yet that represented an 89% increase from the extremely low ratio of 0.93 seen in January 2022.
