Truckload Carriers Brace for a Gradual Recovery in 2024


Published September 14, 2023

The trucking industry has weathered its fair share of storms in recent years, with market conditions that have left many carriers grappling with challenges. While some signs of improvement are on the horizon, industry experts caution that a significant turnaround won’t occur until 2024. In this article, we’ll explore insights from industry leaders, shedding light on the current state of truckload carriers and what the future holds.

A Cautiously Optimistic Outlook

At a recent investor conference, Schneider National’s CFO, Steve Bruffett, provided a glimpse into the industry’s current landscape. Bruffett acknowledged that the bottom of the cycle has likely been reached, but he also stressed that any substantial positive changes in fundamentals are not expected until sometime in 2024. This outlook sets the stage for a “muted peak season” in the trucking industry for the current year.

Bruffett expressed optimism about seeing signs of seasonal activity in the coming months, primarily in September, October, and November. This cautious optimism, he believes, will pave the way for a more constructive start to 2024, characterized by a more balanced and equilibrium-type setup, in contrast to the challenges of the past four years.

Challenges and Adjustments

The flat freight environment that has persisted for months can be attributed to customers rightsizing their inventories. However, Bruffett pointed out that some merchandise restocking is currently taking place, with improvements noted during the back-to-school shopping season. Halloween-related goods are also performing slightly better than expected, although neither category is expected to have a significant impact on carrier results.

Schneider National recently lowered its 2023 earnings guidance, anticipating the third quarter to be the low point of the cycle concerning earnings. This prediction stems from the full impact of contractual bid season affecting its entire customer base. Similarly, Werner Enterprises’ management shared a similar outlook, with Derek Leathers, the company’s chairman and CEO, emphasizing that the overcapacity marketplace and overstocked inventories are now in the rearview mirror.

A Gradual Return to Balance

Werner’s largest customers, including discount stores specializing in household essentials, are in favorable positions regarding their inventory levels. However, the company expects a measured approach to restocking during the peak season this year to avoid the issues encountered with stuffed warehouses last year.

Dollar General, one of Werner’s major customers, recently announced plans to implement promotional markdowns to rightsize inventories, anticipating a $95 million impact on operating income in the latter half of the year. Despite these challenges, Leathers remains cautiously optimistic about the industry’s future but acknowledges that the day-to-day struggle persists.

Seeking Balance in the Market

Werner anticipates a peak season this year, albeit with the challenge of surpassing last year’s performance, which benefited from a considerable amount of project freight. Leathers noted that the industry is only now starting to find a sense of balance, with truckload capacity gradually exiting the market.

Smaller carriers, primarily engaged in spot-market freight, have been facing declining spot rates for over a year. The consensus is that many smaller fleets have exhausted their cash reserves built during the freight boom. These fleets now confront the highest interest rates in two decades and widespread cost inflation, including a 20% increase in diesel prices since early July.

Bruffett also observed capacity exiting the market, citing an increase in the availability of qualified drivers and an uptick in returned equipment in Schneider’s leasing business. The company’s brokerage unit has also witnessed a decline in the number of carriers renewing their authorities.

Looking Ahead

While it remains too early to predict contract rate renewals for next year, Jim Filter, Schneider’s group president of transportation and logistics, expressed confidence that rates are unlikely to decline further. He believes that customers understand the current rate environment and its necessity for the industry’s stability.

In conclusion, the truckload carrier industry is cautiously approaching a turning point after enduring a prolonged period of challenges. Signs of seasonal activity and inventory restocking offer glimmers of hope, but a substantial recovery isn’t expected until 2024. Carriers continue to navigate a market in transition, adjusting to changing dynamics and seeking equilibrium in a post-overcapacity era. The road ahead may be uncertain, but industry leaders remain resilient and adaptable as they steer toward brighter horizons.