The Transportation market in 2024 can be summed up in just a few words: more of the same. Freight rates have been suppressed for the last 12 to 18 months, the economy and the potential for a recession remain concerns, and trucking companies are for the most part waiting to see what the future holds for their industry.
This sameness is partly the result of the disruption that commercial transportation and the supply chain in general experienced during the 2020 pandemic. The transportation sector continues to dig out from the challenges it faced following the COVID-19 pandemic. While the surge in new demand after the pandemic was initially a boon to freight carriers, less-than-truckload (LTL) freight shipping and other transportation services providers, the road to normalcy has been rougher than expected, leading the transportation sector into an overall downward trend for the last 18 to 24 months.
"We had all hoped that the market would bounce back quicker in 2024 than it has," says Mark Gallagher, vice president of National Transportation at Risk Placement Services (RPS), "but it has been kind of a slog throughout the year, dating back a few years. Companies have been struggling, a number of truck lines have exited the marketplace or downsized, and others are seeing idle units because they can't find freight or they can't afford to haul it at the freight rates that are out there right now."
What does that mean for the industry going forward? Naturally, it's impossible to predict the future, but a number of trends are worth watching as commercial transportation evolves in 2025 and beyond.
High Costs Are Becoming the Norm
According to The American Transportation Research Institute (ATRI), the cost of operating a truck reached $2.270 per mile in 2024, up just 0.8% from 2023, although marginal costs jumped more than 6% in that time.
Among the fastest-growing costs are truck and trailer payments (up 8.8%), driver wages (up 7.6%), and repair and maintenance costs (up 3.1%). Insurance premiums for trucks increased 12.5% to $0.099 per mile, according to ATRI, while average operating margins now sit at 6% and lower across all fleet sizes excluding LTL. ATRI found reductions in both per-mile and per-truck revenue in the full truckload and specialized sectors, and highlighted that most of the industry saw its other costs — defined as expenses outside of the core marginal line-items — increase as a share of revenue in 2023.
"Operators are getting hit from a number of different angles right now," Gallagher says. "We're still seeing some new entrants, but many others are leaving the marketplace and those that are staying are often just hanging on. Also, as a new entrant, you're going to pay the highest insurance segment costs, you're going to be fighting for freight on load boards where there are a lot of truckers that are looking for loads and willing to haul them for whatever they can get paid. It's a tough time right now."
Freight Rates Remain a Challenge
Due to excess capacity across the industry, freight rates have been suppressed over the last 12 to 18 months, the economy and the potential for a recession remain concerns through the end of the year, and trucking companies are waiting to see what the future holds for their industry. Larger, well-funded trucking companies with long-term contracts have thrived, while smaller operators have continued to struggle.
"Our hope is that freight rates increase and litigation somewhat subsides to help the commercial transportation industry get back on stronger footing in terms of overall supply and demand," Gallagher says. "But all of those changes would have to be perfect to move the needle very quickly, and I don't necessarily see that happening. Hopefully at least we will have slow, positive progression toward a stronger economy that leads to a healthier transportation industry going forward."
Nearshoring Is Bringing Transportation Work Back
Among the bright spots that ATRI's Senior Vice President Dan Murray is watching is the potential for healthy holiday spending season this year — which bodes well for the trucking industry, given that more than 71% of goods (or $10.4 trillion of the $14.5 trillion of the value of all goods shipped in the US) move by truck. Another bright spot is an accelerating shift toward reshoring and nearshoring, bringing manufacturing facilities back to the US from other countries. He also cites an increase in activity coming out of Mexico to the US as a positive factor.
"The good news is that nearshoring is cutting down on transportation costs by removing the very expensive Los Angeles Long Beach port activity and the need to move containers in and out of there," he says. "But that's a longer-term trend that we aren't really feeling in our pocketbooks at this point. I'm an optimist in general, and I think the latter half of 2024 will be good and that 2025 will be very, very good."
Lower Interest Rates Could Benefit Transportation
The Federal Reserve began lowering interest rates earlier this year and is expected to continue cutting through 2025. This trend could prove beneficial to the commercial transportation sector by not only helping operators purchase new equipment (as higher rates have delayed many large purchases), but also by encouraging new spending in the many industries that the transportation sector supports.
"Consumer spending is two-thirds of the economy, and I'm an optimist, so if the Fed rolls back interest rates, I think sales will improve," says Murray with ATRI. "Right now, it is very expensive to buy a house. But think about how important housing is to the trucking market. When a house is built, those raw materials are delivered on a flatbed truck. The minute the house is finished and sold, the buyers race to fill it up with stuff from Lowe's, Home Depot or wherever else. It all comes on a truck. The housing market is very important to trucking, and a change in interest rates could have a direct impact on the health of this market in the years ahead."
Whatever happens in 2025, the relationship between transportation and insurance is becoming more of a partnership than ever before. Costs are increasing, risk levels are higher than ever, and this landscape requires a good relationship on both sides to manage costs in ways that benefit all involved.
"We embrace the idea of carriers having more rapport with the direct consumer," Gallager says, "whether it's in loss control services, getting to know the owners and the safety directors, and learning more about how a truck line is embracing the opportunity to become a safer operation. Every carrier wants that direct line of communication, especially in the event of a claim, so that they can jump on it right away, already understanding the situation, and not have to delay or waste time. In a challenging market, a good working relationship and each side makes the whole process faster, easier, and more effective for everyone."
Learn more about what's next for the transportation insurance market in the RPS 2024 Transportation Market Outlook.
