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Expert Freight Market Forecasts For 2023

Expert Freight Market Forecasts For 2023

At FreightCaviar, we believe it’s always important to look ahead and plan for the future. That’s why we’ve gathered exclusive freight market forecasts from top logistics executives for the year 2023. These experts will examine truckload demand and capacity trends from the past in order to make informed forecasts about the future of freight. They’ll also discuss the impact of these trends on businesses in the logistics industry. Get ready to dive deep and find out what the future holds for freight rates in 2023!

Meet Our Experts

Tim Higham is the President and CEO of AscendTMS, the largest TMS with 51,619 active customers. Higham’s software gives him live and real-time access to key information needed to give accurate forecasts. 

Jake McLeod is the COO at EXO Freight, the world’s first open deck transportation marketplace driven by technology. McLeod has been in the industry for about 15 years and has seen the worst market (2008/09), an insanely high market (2021), and everything in between.

William Kerr is the President of Edge Logistics, a company that’s been recognized for its record-setting growth. Kerr was named one of Crain Chicago’s 40 under 40, which honors company leaders who have successfully improved the world through their endeavors. 

We’ve also got input from the CEO of a Leading 3PL, who wishes to remain anonymous. 

The Good Times Can’t Last Forever

We’ve got to take a moment to look back. The buzzword of 2020-2021 was unprecedented, and it’s the perfect way to describe the freight market at the time. Such high rates weren’t normal – and this attracted a lot of newcomers and hurried decision-making. 

CEO of Leading 3PL:  I will say that a lot of our industry is historically not great at thinking long-term. We see companies make decisions that help them most today, here and now, without concern for long-term success and stability. I think some companies overcommitted themselves with hiring, unsustainably lucrative compensation packages…and other short-sighted decisions. As things have turned the other direction in the market, these same companies were forced to make unfortunate hard decisions. Starts with layoffs. When that’s not enough, things get bleaker. We saw a lot of that in the second half of 2022.

 

McLeod: Unfortunately, thousands (hundreds of thousands) of new carriers and owner-operators entered the market during this time and have no idea what normal rates look like, have never run a business properly before, overpaid for equipment, and could generally run a company that was profitable despite not being particularly well operated.  Now that the tide has gone out, we are seeing who is swimming naked, and it is a lot of the industry – these carriers are going to be in desperate times to try and make their business work, or they will exit (voluntarily or by going out of business). 

Higham: Amazingly, most people under the age of 35 haven’t experienced a real recession since they’ve been employed. But they’re about to, and it won’t be pleasant. 

Predictions on the Market

As for 2023, here’s what the experts had to say. 

Higham: I can literally see, in real-time (because of the 51,593 companies that use AscendTMS every day to run their logistics & trucking operations), the rapid downturn in rates on every load, the fewer viable freight companies out there, the lower total staff being employed at each entity, the lower number of trucks running, the lower TL and LTL volumes being moved, and the incessant squeeze on gross margins. These aren’t guesses, these are the real actual experiences of freight brokers, asset carriers, and shippers every single day.

Kerr: We will see a slower January and early February than last year, and then in late February/early March when most of the drop/drop shipper-national carrier rates reset to the 2023 rates, we will see the live/live spot market creep back up to a positive spot market through the summer and into peak season. By positive, I mean I expect that spot rates will be incrementally higher than contract rates on aggregate of live and drop pricing. That is not to say that we will have an inflated or accelerated spot market, I do not think that will occur in 2023 except in short bursts, regionally.

McLeod: What we are seeing is honestly a return to “normal” – the truckload market rates we saw in late 2020, 2021, and early 2022 were not normal or sustainable and truly a bubble (much like everything mentioned previously). While carriers scramble for business, they will take freight for cheaper and cheaper rates, as there are fewer and fewer load opportunities available as production slows, spending slows, etc.  At some point, (I keep hearing from people Q1 or Q2 2023, I think it will be closer to 2024,) rates will hit a bottom and then likely bounce up a bit before settling into a normal market rate again (which I think is still lower than we are seeing truthfully).  This will be due to capacity crunching again, consumer confidence and spending increases, and an overall increase in economic activity.  

Forecast Data from Arrive Logistics

To summarize the report from Arrive Logistics, freight rates in 2023 are expected to be more stable compared to the previous year, with long-term contract rates returning to more typical levels. There may be less demand for shipping services, leading to more available capacity and making it easier for companies to stick to their preferred shipping routes. 

However, there may be fewer shipping options available in the first half of the year due to a decrease in capacity, which could leave the market vulnerable to disruptions. There is likely to be less capacity available in the market due to high contract rates forcing some owner-operators and small companies out of business. However, this decrease in capacity may be offset by the influx of capacity that entered the market in the past and strong routing guide compliance. 

Demand for shipping services may be impacted by a cooling economy and lower consumer spending, but demand may be supported by the need to fulfill backlogged orders in manufacturing and other industries.

How will these trends impact companies? 

These market forecasts are important because they shape how businesses will move in the environment until a new pattern arrives. Of course, nothing can be said for certain, but smarter leaders will adjust their behavior accordingly. The experts give their thoughts on how the trends will impact logistics companies. 

Higham: Massive cost cutting will be needed by a massive number of companies in 2023 (and, if you have a big salary that was negotiated during the excesses of late 2020, 2021, or early 2022, watch out). But, every recession can also be an opportunity. Those companies that prepared for the inevitable “rainy day” will manage to stay solvent, and they’ll pick up the customers of those that don’t. 

CEO of Leading 3PL: If the trend continues with volumes and rates declining, things will get much worse for that same set of companies[who made short-sighted decisions]. I think right now, there’s a lot of “holding on”, trying to make it through the downturn. If this lasts long enough, those short-sighted companies won’t have the resources to sustain themselves. Hopefully, things turn around soon and business booms again. But if not, things will get uglier before they get better.

McLeod: I am not a doomsayer or getting political by any means either just being real with what I see happening, what I have seen happen, and where I think we are heading and where we are at. 3PLs/Brokers are not immune to this either, as we have seen thousands laid off in the last few months from many of the major players, and I am sure plenty we have not heard about from the medium and small players, not to mention the most recent news from CHR)   

There’s a consensus that in 2023, companies will be more risk-averse, in addition to looking for any way to cut costs. This could be a good opportunity for those looking to gain new business. Long-standing partnerships may not be holding as strong when it comes to keeping a company afloat. 

Higham: Freight executives are looking to save money right now, and they’ll give their business to those that can show instant ROI. In 2023, people will be more interested in securing cost savings than ever before, and so they’ll finally be willing to go through the pain of switching providers to realize those savings. 

So, there could be room for growth and innovation, particularly regarding freight sales technology. Any tool or service that can streamline processes or lower operating costs might have a good year. Our experts discuss why businesses like theirs are in a prime position to take advantage of the coming market conditions. 

Higham: Freight sales technology will be at the forefront this year, like ShipperCRM, to secure more (and better) shippers, high-value TMS, like AscendTMS, to eliminate TMS costs, and more automation, with freight AI, to reduce headcount. Everything a broker, carrier, or shipper uses in 2023 will be about VALUE!

McLeod: I am fortunate that EXO is at a point where we have nowhere to go but up, and we continue to capture new business opportunities from new and existing customers.  We have built a better mousetrap for carriers and shippers to do business. While traditional brokerage models are not going anywhere, they will have a harder time defining their value prop as time marches onward. 

Things don’t seem catastrophic, but companies will feel the pressure this year. It depends on the mindset and decisions a company made in the past that will impact its longevity. 

McLeod: So while this all may sound pessimistic, I think it’s more just understanding that there was always going to be a correction coming, and if you thought that 2021 was going to be here forever and not a black swan event then you’ll be in for a really rude awakening, this is not a get rich quick industry. There are ups and downs, but there is a happy normal, and we are not far from that, but there will still be some pain to endure before we get there. Those that have built good businesses will come through better than before. 

General Thoughts From Instagram Followers

FreightCaviar’s Instagram poll brought in 1000 responses from followers, who are mostly made up of people working actively in the industry. We asked followers, “Will the market bounce back in 2023?” 

  • 48% said yes, the market will bounce back fine in 2023.
  • 52% disagreed. They think we won’t see things improve in 2023. 

Take a look at some of the written responses below. 

FreightCaviar Instagram poll responses to “What are your predictions for 2023?”

So, of course, many external factors can make the market unpredictable. And here, experts have provided a range of predictions, from more stable rates and healthy demand to the potential for disruptions and lower capacity. It is clear that the market will continue to evolve and that businesses in the logistics industry will need to stay informed and adapt to changing conditions to remain competitive. It is important to stay up-to-date on industry trends and developments and to be proactive in planning for the future (like following FreightCaviar, for example). By staying informed and taking a long-term view, companies can be better prepared to navigate the ups and downs of the freight market in the coming year and beyond.

MSC Infiltrated By Cocaine-Smuggling Cartel? 

MSC Infiltrated By Cocaine-Smuggling Cartel? 

In a statement, Mediterranean Shipping Company, MSC, has denied allegations made in an exposé from Bloomberg that its company has been “infiltrated” by the Balkan drug cartel. 

MSC, founded in 1970 with headquarters in Geneva, Switzerland, is one of the largest shipping companies in the world, operating a fleet of over 700 vessels and present in over 150 countries. It carries an estimated 23 million TEUs annually.

What’s in the report from Bloomberg? 

In 2019, US authorities seized a jaw-dropping 20 tons of cocaine, worth about  $1 billion, from the MSC Gayane at the Port of Philadelphia. Several members of the crew were found guilty in connection with the operations. Due to the magnitude of the crime, authorities seized the entire ship as well. 

In an accompanying Bloomberg Original video, reporters Lauren Etter and Michael Riley detail how such a large-scale operation took place.  They reveal that The MSC Gayane cocaine operation involved eight crew members, including the chief mate, who loaded cocaine onto the ship by crane from smaller boats that sailed alongside the enormous vessel in South American waters. 

Bloomberg goes deeper into the background of these eight workers…

…and discovers that four of them were directly recruited for operations aboard the Gayane. This led them to Montenegro, a country known for skilled seafarer labor. MSC has the biggest shipping recruitment ties to the country, employing over a third of all Montenegrin sailors. 

That’s where the Balkan Cartel comes in. 

Etter explains the widespread control organized criminal groups have had in the Balkan since the breakup of Yugoslavia, the Balkan wars, and the subsequent collapse of the economy. So, Etter goes on, it only makes sense that the Balkan Cartel would target sailors on MSC ships for recruitment in nefarious operations. 

Riley says that MSC was made aware workers were being targeted by Balkan cartels…

…and had ample opportunity to curb the issue. MSC management was reportedly approached by at least three different countries about the problem. The opinion of law officials is that the company did not do enough. But MSC has a different view. 

MSC defends itself in a recent statement

  • They defended their vetting procedure, saying the traffickers used “groundbreaking methods” that could not be foreseen or predicted by any honest shipping company. 
  • They had increased security on ships going from South America to Europe. 
  • Mainly, the company argues that illicit trafficking is an industry-wide problem and that shipping lines and staff are not mandated, resourced, or trained to confront the dangerous individuals who operate organized criminal organizations. 

The Bigger Picture

US authorities have calculated a $600 million fine and want the company to completely forfeit the Gayane in a civil case against the company. MSC has paid $50 million to “bail out” its ship in the meantime. The case is important because it will determine how much, if any, responsibility MSC and other shipping companies bear when incidences like these happen. 

C.H. Robinson Settles Crash Lawsuit After Supreme Court Denial

C.H. Robinson Settles Crash Lawsuit After Supreme Court Denial

C.H. Robinson finally settles a court battle over its responsibility in a 2016 crash that left a man paralyzed, details a report from Transport Drive.

A Timeline of the C.H. Robinson Case:

  • December 2016: A tractor-trailer crashes into a vehicle on a highway in Nevada, leaving motorist Allen Miller a quadriplegic.
  • 2017: Miller files a lawsuit against the brokerage, C.H. Robinson Worldwide, claiming negligence in the crash. The case is filed in federal court.
  • June 2018: Miller’s attorney proposes a settlement of $27.3 million, stating that Miller will require about $545,000 a year for life care costs.
  • November 2018: A U.S. district court rules in favor of C.H. Robinson, stating that federal preemption of the Federal Aviation and Administration Authorization Act applies.
  • But: 9th Circuit U.S. Court of Appeals overturns the district court’s decision and finds that a safety exception to the federal law applies.
  • June 2021: The U.S. Supreme Court denies C.H. Robinson’s request to hear the case.

Despite the company’s vocal pushback…

…which included an op-ed from President and CEO Bob Biesterfeld, the lower court’s ruling stands. According to their interpretation, C.H. Robinson can bear responsibility for the crash because of a safety exception in the Federal Aviation and Administration Authorization Act.

What does this decision mean for other brokerages?

Biesterfeld feels the FMCSA is shirking its responsibility to ensure safety among motor carriers since they set the industry standards. It could be that this decision opens the door for a lot more brokerages and shippers to be held liable for crashes at an unfair frequency.

On the other hand, Miller’s attorney says we don’t see many cases pursuing other brokers because “they’re not negligent. They do vet [carriers].” So, it could end up serving as a wake-up call to increase scrutiny when it comes to who brokers book business with.

$2 Billion Spent by Trimble to Buy Transporeon. What Does It Mean? We asked the Expert. 

$2 Billion Spent by Trimble to Buy Transporeon. What Does It Mean? We asked the Expert. 

We were curious when we saw that Trimble spent a whopping $2 billion USD on a freight tech company in Europe called Transporeon, especially after Trimble recently closed down another recent acquisition called Kuebix that they just bought in 2020 for $201 million USD. 

So, we asked our resident expert, Tim Higham, the CEO and founder of AscendTMS, a popular freight TMS software company with our readers (and a FreightCaviar sponsor) what this means for the industry and freight tech in general. 

Paul-Bernard Jaroslawski (PBJ): Tim, will this deal by Trimble fix all the problems we all face in logistics in North America?

Tim Higham: Ha! Good one, Paul. No, it won’t. But it’s another piece of the puzzle. Digitizing trucking and logistics is going to be an ongoing two-decade process, and this is a vote of confidence by Trimble in that process. Also, Transporeon mainly operates in Europe, and it will take time for an Americanized version to be brought to the United States. 

PBJ: Why did Trimble spend $2 billion USD on them? That’s a lot of money, especially after the Kuebix closure. Is Transporeon profitable?

Tim Higham: I have no idea if Transporeon is profitable as they are (were) privately held. But, Trimble stated publicly that the deal would be immediately accretive to Trimble’s revenue growth and margin profile and that they (Transporeon) generated profitable growth over the past 15-plus years. So, this leads me to believe that they are indeed profitable. To me, being profitable means that Transporeon is proven and they have a product that clearly meets a need in the market. Profitability says a lot about market acceptance for any product.   

PBJ: Can Trimble easily bring Transporeon to the North American market?

Tim Higham: As a Brit, yet growing our own highly profitable TMS software company in North America, I can tell you that there are a lot of differences between how logistics work in Europe versus North America. Today, AscendTMS is the most widely used TMS platform in the USA, with paying customers, mainly by accident, in over 30 countries today. So, I can tell you from the front lines that every jurisdiction around the world has particular needs, and there is no all-in-one solution that will translate easily between Europe and the USA. So that’s why the major US freight tech providers aren’t big in Europe and vice-versa.  

Moreover, the largest companies in North America already have very sophisticated supply chain technology in place, so displacing that will be challenging and take time. When Transporeon started in Europe in 2000, their technology solutions had little competition, and thus it was easier to get a fast market share. However, today in North America, there’s a lot of entrenched technology that will need to be displaced in order to get a foothold, especially in the top end of the market. 

PBJ: So, how does Transporeon get a share of the market in the US? 

Tim Higham: They’ll probably start by getting one or two of their niche products into a company that meets a particular need, and they’ll likely use that success as a door opener. Then, over time, they’ll hope to further open the door to more of their products as opportunities arise. 

Also, their new owner, Trimble, already has a substantial market share of their own existing trucking and logistics technology in North America. So, as the natural technology replacement cycle takes place, Trimble will now have a series of new products and services to offer their existing customers rather than losing them to newer freight tech competitors. So it’s a smart strategy, but it’s a long-ball game.

PBJ: Will this deal help digitize the industry?

Tim Higham: As I’ve said publicly many times, the main issue with freight technology is that getting the top 5% or so of shippers, carriers, and brokers connected and integrated digitally is pretty straightforward. This is because the largest players have big tech budgets and large IT teams. But, if only 5% of the industry is ready to connect with each other, it only works as long as they are working with each other. 

Unfortunately, the fact is that the other 95% of the industry, the SMB player, has little to no technology budget and no IT team. So, how do they participate in this digital evolution? 

The smaller market players with under 20 trucks or under $20 million USD in sales (as a 3PL) or freight spend (as a shipper) represent over 95% of the entire market, and they need cheap, simple, and fast to deploy solutions in order to participate with the more sophisticated top 5%. 

If you leave the smaller companies out of the freight tech evolution, true digitization across the industry will never become a reality. It’s on the entire industry to invite them in. 

PBJ: So how can that be fixed? 

Tim Higham: It’s already happening. The largest shippers, 3PLs, and technology players are already handing out tools, like AscendTMS, to the smallest players to help to get them digital. 

Don’t be fooled that this is a purely altruistic endeavor, though. The most prominent players have realized that if they want to truly see the efficiencies of digital freight and logistics processes hit their balance sheet, they need every single vendor, customer, and partner to be capable of doing business digitally. That’s why many of them today literally give away AscendTMS to their SMB partners so they can participate with them. And in turn, both parties see a rapid reduction in costs and the resulting increase in profits. 

PBJ: How long will this all take?

Tim Higham: To use an American baseball analogy, my guess is that we’re only in the 2nd inning in North America. Today over 51,300 trucking, logistics, and shipping companies use AscendTMS, and they all benefit from digital freight technology. But that’s still a tiny part of the total addressable market in North America and even smaller when you look globally. 

The good news is that we see more and more large industry leaders helping to educate the smaller players about the available freight software solutions, like AscendTMS, so they can easily participate and realize cost savings themselves. 

The pace and urgency are already increasing, and there’s a lot of opportunity for the likes of Trimble and Transporeon over the coming decades to help bring the entire market toward a fully digital future. 

Yes, this will all take time. But the good news is that AscendTMS, like Trimble and Transporeon, have shown that there is an eager market for our solutions, and it can be done profitably along the way. 

PBJ: Tim, as always, thanks for your expert insight on this subject and for helping us all to understand the freight tech world. 


Tim Higham: My pleasure, Paul. 

Average Diesel Prices On The Mend Across The US

Average Diesel Prices On The Mend Across The US

Things are looking better for truckers – the average price per gallon of diesel declined for the fifth week in a row, according to data from the Energy Information Administration (EIA). The price fell sharply by 21.3 cents to $4.754 for the week of December 12. Average diesel prices are still up $1.10 from a year ago.

The trend in falling average diesel prices since the week of October 24 totals to 58.7 cents. This creates a more hopeful outlook for the industry as we enter 2023.

Better days ahead in 2023?

Recently, the EIA lowered its forecast for average retail diesel price for 2023 from $5.05/gallon to $4.48/gallon, citing high refinery utilization. This is an improvement, sure, but still steeper prices compared to 2021 and earlier.

We suggest some cautious optimism...

…but don’t go too crazy. Back in October, things looked dark for trucking companies, but we’re starting to see some light through the clouds with these new adjustments.

This could lead to increased profitability and a more positive outlook for the industry. Some truckers will be encouraged by the lower prices projections, which suggest that the trend of falling diesel prices may continue. However, as we’ve seen throughout this turbulent time for logistics, it’s better to be cautious. Wait to see if the trend continues before making any drastic changes to your business.

You don’t need to make any changes to take advantage of lower diesel prices because profitability improves, and the lower fuel expenses offset other costs. Be careful if you’re thinking about taking on longer hauls or different routes due to the drop.

Worry For Air Freight, Companies Return To Ocean

Worry For Air Freight, Companies Return To Ocean

Issues like the Russia-Ukraine crisis, China’s zero COVID policy, high inflation, and the threat of recession have led to a significant drop in air freight demand reports Beroe Inc. in PRNewswire.

Which industries play the biggest role in air freight demand?

  • North America & Europe: Automotive, industrial, and agricultural sectors
  • Asia: Electronics, followed by consumer products

These global issues have air freight operators desperately trying to stay afloat by cutting rates, optimizing routes and flights, restructuring pricing models, and reducing load capacity. However, these measures are not enough to offset the decline in demand.

Unimpressive numbers:

  • Net supply expected to grow a negligible 0.04% by the end of the year.
  • Demand is expected to grow a little more at 0.8%.

We see some bigger percentages, but they aren’t good news. Rising inflation led to a 40% increase in jet fuel prices. So, the trip is getting more expensive while simultaneously flying light due to a slowdown in global trade.

Another key impact is a labor shortage across W. Europe and America. The lack of workers impacts overall flights, leading to backlogs and cancellations.

Not by Air, By Sea.

An article from SupplyChainDive details the drop in air cargo rates as retailers return to sea shipments.

To summarize, air cargo rates and volumes continue to decline, leading to improved financial and operational results for some retailers in Q3. For example, Gap reported improved operating margins due to lower air freight rates, and Lululemon saw increased product margins driven by moderating air freight costs.

Some retailers have started moving shipments away from air freight and back to the ocean, despite longer transit times, due to the improved market landscape for ocean transport. Shippers are expected to continue benefiting from softening rates in both air and ocean, potentially lowering shipping costs in 2023.