In the ever-evolving landscape of the freight industry, a new phenomenon is emerging that threatens to disrupt the delicate balance between shippers and carriers. This looming shift in market dynamics is known as “carrier revenge” and promises to reshape the way goods move across the country.
Over the past two years, shippers have had unprecedented influence on the freight market. Overcapacity has continued to put significant pressure on rates, leading to what some industry experts have called “shipper revenge.” During this period, spot truckload rates, adjusted for inflation, have fallen to a low not seen since 2009.
During the early stages of the Great Freight Recession, contract rates remained stubbornly high as shippers watched the market cautiously, unsure whether this reset was a temporary dip or a more substantial shift. However, in the first quarter of 2023 it became clear that the recession was not a fleeting phenomenon. As a result, shippers began demanding significant rate concessions from carriers, a trend that only accelerated as the year progressed.
Despite the prolonged recession, recent data indicates that the Great Freight Recession is coming to an end. Key indicators point to a market turnaround:
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Increasing rejections of tendersTender rejections have risen to over 6%, reflecting a tightening market in which carriers can be more selective about the loads they accept.
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Rising spot rates: Spot rates are increasing and exceeding those of 2022 and 2023. This trend indicates a strong increase in demand or a decrease in available capacity, possibly both.
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Decreasing capacity: The implementation of the FMCSA’s Clearinghouse-II regulations in November 2024 could potentially sideline 177,000 truck drivers, further tightening the market.
As the market pendulum swings back in favor of carriers, the stage is set for “carrier revenge.” This concept implies that, after a period of low fares and intense competition, airlines will soon be in a position to leverage their new power. The consequences for shippers can be significant:
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Higher freight rates: As capacity shrinks and demand increases, carriers may gain the upper hand in negotiating higher rates.
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Selective tax acceptance: Carriers may become more discerning about which loads they accept, potentially disrupting shippers’ established route guides.
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Reduced flexibility: Shippers who have become accustomed to the abundance of available capacity may struggle to secure the transportation of their goods.
Several factors are coming together to accelerate this power shift:
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Political influence: Potential policy changes following the recent elections could stimulate economic activity, increasing demand for freight transport.
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Immigration policy: Tighter immigration enforcement could impact trucking workers, potentially taking away some of the industry’s capacity.
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Changes in regulations: The implementation of new regulations, such as the Clearinghouse-II rules, could further limit the available driver pool.
As the freight market enters this new phase, shippers must adapt their strategies to mitigate risk:
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Fix rates: Consider entering into longer-term contracts to protect against sudden interest rate spikes.
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Diversify the carrier base: Expand relationships with multiple carriers to ensure access to capacity.
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Optimize operations: Streamline loading and unloading processes to make your freight more attractive to carriers.
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Make use of technology: Use real-time market data and analytics like SONAR to stay ahead of market trends and make informed decisions.
The concept of “carrier revenge” is a stark reminder of the cyclical nature of the freight market. As the industry emerges from the Great Freight Recession, the balance of power is about to shift dramatically. Shippers that recognize this changing tide and adapt accordingly will be best positioned to meet the challenges ahead. In the freight world, as in many aspects of business, preparedness and flexibility are the key to long-term success.
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