Shippers currently hold the upper hand in the freight market as spot and contract rates soften. However, industry experts predict that rates will stabilize throughout 2023.
Analysts point out that shippers have gained significant market power, leading to declining contract rates. While spot rates have already reacted, contract rates are expected to decrease for at least six months. The bottoming process appears to be underway, indicating a potential balance in the market.
Carriers are rebidding contracts to retain capacity, resulting in a 12-16% decrease in new negotiated rates. However, it is unlikely that rates will reach the lows seen in 2019.
Spot market challenges are expected to continue in 2023, but rates have limited room to drop further. Experts suggest that spot rates will find a floor in the first or second quarter, while contract rates normalize.
The lag between spot and contract rates typically lasts four to six months, making contract rates more laborious to adjust. Despite challenges such as increased operating expenses, carriers are adding capacity to the market.
Maintaining stable relationships and volumes is crucial for shippers and carriers. Large fleets have transitioned to 100% contract models, ensuring committed freight and dedicated capacity.
While some shippers shift to the spot market for lower rates, more contract negotiations are anticipated, particularly among carriers and long-term relationships.
Experts project a 3-5% decrease in contract rates for 2023, with potential further reductions in case of a recession. However, costs are expected to rise by 2-3%.
The propensity of the U.S. economy to generate freight has slightly declined, but freight levels remain higher than average.
Overall, 2023 is expected to bring more stability and a return to normal market conditions. The trucking industry faces challenges, but the balance between costs and the market will be crucial.
