Tale of Two Loads: LTLs managing reduced demand better than TL carriers

There is a sharp, telling contrast among yields of trucking companies, depending on which niche they are operating.

An expected slow first half for freight demand has morphed into uncertain expectations for the rest of the year. Most truckload (TL) executives are hoping for a second-half rebound to make up for a below-par first half.

“You will see things improve as inventories go down.” Greg Orr, president of CFI, a major truckload carrier, told LM. “The big question mark in my mind is what’s happening in China? Inbound quantities are down, specifically in TL. But I believe the back half of the year will be a lot better than the first half.

That’s on the $332 billion TL side where the largest carrier (Knight-Swift) barely has 1% market share. For a big change, demand and pricing are a bit different on the smaller, $58 billion less-than-truckload (LTL) side, where the top 25 carriers control 85% of the market.

According to figures compiled by SJ Consulting, which closely tracks the trucking industry, loads on the LTL sector fell 9.1% year over year. But LTL pricing jumped 2.7% year over year.

On the truckload side, the comparison is even more stark. First-quarter 2023 TL loads were off 6% year over year. But TL revenue per shipment fell 5.7% year over year on the truckload side.

“LTL fared much better than TL in revenue per shipment,” Satish Jindel, principal of SJ Consulting, told LM. “I would attribute that to better pricing discipline in LTL partly due to a more limited number of carriers.”

The TL data is for larger publicly traded asset-based TL carriers. It does not incorporate the bigger drop in spot market, which is showing up in the reports of publicly traded brokers. Also, the revenue decline is partly due to lower fuel surcharges with lower fuel prices, Jindel said.

But other independent surveys of the industry support Jindel’s pricing theories.

The American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 1.3% in May year-over-year, the most recent month for which data is available at press time, following a 3.4% annual decrease in April and a 2.4% annual decrease in March.  

“Tonnage had a nice gain in May, but remains in recession territory,” said ATA Chief Economist Bob Costello. “Additionally, tonnage continues to contract from year earlier levels as retail sales remain soft, manufacturing production continues to fall from a year ago, and housing starts contract from 2022 levels.”

J.B. Hunt executives said recently that the TL market is in the midst of a “freight recession,” which caused its operating revenues to fall 7% to $3.23 billion in the first quarter.

But Hunt executives are bullish on the future. Hunt CEO John Roberts recently said it’s an if, not when, question that TL freight demand will come back to normal.

“It’s really a question of when,” Roberts said, citing uncertainty over imports from China and elsewhere.

Trade at the Port of Long Beach in April declined nearly one-third from the same period last year as retailers continue to clear warehouses and shippers shuffle routes from the West Coast to seaports on the East and Gulf coasts.