The freight industry is the backbone of international trade, facilitating the movement of goods across the globe and ensuring countries and industries continue to sustain economic growth. As a shipper or carrier looking to navigate the freight ecosystem, it is crucial to stay in the know about what is transpiring in the market.
As we prepare to read the tea leaves for 2025, let's not forget to look back at 2024, especially Q4 — which has been a proper rollercoaster ride. Reviewing 2024's Q4 provides valuable context for anticipating trends and challenges in 2025. This article will summarize Q4 developments across various transportation modes and offer predictions for the year ahead, drawing on data from industry reports, economic indicators, and expert analyses.
Q4 2024 Wrap-Up
The freight market in Q4 exhibited mixed dynamics. While some sectors like discount chains and big box retailers experienced seasonal demand increases, others like apparel and household appliances remained weak. Trucking freight volumes rose modestly toward the end of the year, particularly in inland distribution hubs like Allentown, Pennsylvania. However, broader demand remained subdued compared to historical averages.
Ports like Los Angeles continue to score record-breaking volumes, especially as shippers gear up for another ILA strike across the U.S. East and Gulf Coasts in January and a potential trade war that could kick off due to the impending tariffs. However, these increased volumes have failed to translate into higher demand for trucking carriers due to the market retaining too much capacity (despite a significant number of trucking authority exits).
It wasn't all bad for the freight world, though. Spot rates, a key pricing indicator, saw slight upticks but remained below the levels recorded in 2023.
Performance By Transport Mode
Each mode of transport had varying experiences. Take, for example, the air freight industry, which has seen record growth fueled by a rise in demand for Temu and Shein's products. On the other hand, the trucking sector has not been so fortunate. Here is a rundown of each of their performance for Q4.
Trucking
The truckload sector showed varied performance across its subsegments. Spot rates in key markets, including Allentown and Charlotte, experienced modest increases in response to seasonal demand. For example, dry-van spot rates from Allentown to Charlotte climbed from $1.79 per mile in August to $1.87 in late September. However, the national average of $2.01 per mile was still lower than last year's $2.12. Contract rates remained stable but did not exhibit significant growth.
The sector's capacity remained ample, with many smaller carriers exiting due to economic pressures. Some experts believe the exits are good, especially because they will shrink capacity, allowing current stakeholders to increase rates. The current overcapacity is a result of a large number of new trucking authorities that were created at the height of the pandemic, who came into the market searching for high-paying loads resulting from an outsized market demand. Now that the demand has cooled off, the market is purging out stakeholders stuck with high operational costs and low margins.
Rail
A mix of international intermodal growth and domestic stagnation influenced rail freight volumes. While international shipments supported intermodal traffic, domestic intermodal struggled to gain traction amidst high-level competition from trucking. Carload volumes showed modest gains, but rail network congestion and infrastructure limitations continued to pose operational challenges.
Ocean Shipping
The ocean freight sector grappled with softening global trade volumes and port congestion. In the wake of geopolitical tensions, more shippers in the e-commerce and fashion-related sectors opted for air freight. Then, there was the issue of the ILA strike, which spurred an increase in shipping volumes across the U.S. West Coast as scared shippers looked to avoid the U.S. East and Gulf Coast region. The labor strike is poised to return in January if the current standoff between the ILA and USMX continues to be a stalemate.
NRF, which counts the country's largest shippers, Walmart, Target, and Lowe's among its members, said it expects November container volumes to hit a record 2.17 million 20-foot equivalent units. With President-elect Donald Trump's victory, the rumors and potential of trade wars have continued to escalate. The result? More shippers seek nearshoring alternatives, impacting maritime volumes across the usual high-traffic lanes.
Nonetheless, container volumes slightly improved in key regions such as California, but freight rates remained under pressure. The average schedule reliability of vessels improved marginally compared to earlier in the year, but delays persisted in some ports, especially those experiencing labor disruptions.
Air Freight
Strong e-commerce activity buoyed air cargo, particularly along trans-Pacific and Asia-Europe routes. This was mainly led by Chinese e-commerce majors like Shein and Temu, which airlifted packages and leveraged the deminimis rule to bring freight into the U.S. without paying customs duties. However, capacity constraints stemming from aging aircraft and delays in new plane deliveries posed significant hurdles. Cargo volumes increased by 5.8% year-over-year, but the sector faced rising costs due to supply chain issues and higher freighter leasing rates.
Key Economic Indicators and Their Impact
Macroeconomic factors significantly shaped freight demand during Q4. The U.S. economy showed resilience, with modest GDP growth supported by consumer spending. However, manufacturing activity contracted for the second consecutive quarter, as indicated by the Purchasing Managers' Index (PMI), which dropped to 47.9 in August. Elevated inventory levels in warehouses further dampened freight demand, especially for trucking and rail.
2025 Freight Market Predictions
The U.S. economy is expected to experience slower growth in 2025, with the country’s GDP projected to expand by approximately 1.5%. Inflationary pressures are anticipated to ease, though high interest rates may continue suppressing business investment. The Federal Reserve recently cut rates by 25 basis points to bolster labor, but as inflation continues to hold strong, 2025 may see fewer cuts.
Consumer spending will likely decelerate as rising unemployment and household debt weigh on disposable incomes. Collectively, these factors suggest subdued freight demand in the first half of 2025, with potential improvements in the latter half.
Key Trends and Disruptions to Watch
2025 might be transformational, especially considering the new president-elect’s trade policies, which shippers have braced for. Some trends and disruptions include:
1. Technology and Automation
Emerging technologies such as artificial intelligence (AI) and automation continue to dominate various industries and are expected to make further inroads in the freight world. Stakeholders can expect them to shape the freight industry's future, especially through enhanced efficiency and transparency. However, they will require significant investment and regulatory alignment.
2. Sustainability and Regulations
Environmental sustainability remains a focal point. Stricter regulations are prompting investments in cleaner technologies, and more stakeholders within the freight industry will adopt more electric vehicles, alternative fuels, and energy-efficient practices, reshaping operations across all modes.
3. Supply Chain Resilience
Building more robust supply chains will be imperative to mitigate risks from potential disruptions, including natural disasters, labor disputes, and geopolitical tensions. Diversification of sourcing and distribution strategies will be critical in enhancing resilience.
4. Geopolitical Factors
Global political and economic developments will continue influencing freight markets. Trade agreements, tariff policies, and regional conflicts could significantly impact supply chain dynamics and freight demand.
2025 Predictions by Transport or Freight Mode
Like in 2024, the current tide is bound to impact various freight modes differently. For example, trucking stands to win if there is a higher emphasis on nearshoring in Mexico, but not so much on ocean freight. That said, beyond the nearshoring boom, other factors can spur various reactions from each mode of transport.
These are some of the predictions for 2025
Trucking
Experts believe the trucking market is poised for moderate growth in 2025. Tightening capacity and technological advancements will drive most of it. As excess capacity continues to exit the market, spot rates will naturally start rising, but they should be in the single digits for now. Innovations have continued to sweep the trucking industry. Some of them, such as electric and autonomous trucks, may gain traction, although widespread adoption remains several years away. Driver shortages and rising wages will continue challenging the sector, particularly for long-haul routes.
Rail
Rail freight is expected to face headwinds in 2025, with limited growth in domestic intermodal volumes. Infrastructure investments and regulatory changes could offer long-term benefits, but their immediate impact may be muted. More likely than not, the sector's reliance on international shipments will likely persist, which will, in turn, necessitate enhanced competitiveness in domestic markets.
Ocean Shipping
In 2025, ocean freight must navigate a complex landscape of fluctuating global trade volumes, rising tariffs, and evolving environmental regulations. Vessel capacity is anticipated to remain stable, and freight rates are expected to experience modest gains. However, as green logistics takes center stage, compliance with stricter emission standards will drive investments in greener technologies, potentially increasing operational costs.
Air Freight
Air cargo demand is projected to grow steadily, fueled by e-commerce expansion and resilient supply chains. Cargo volumes are expected to reach 72.5 million metric tons next year, a 5.8%
increase from 2024. However, capacity constraints stemming from aircraft shortages and delivery delays will continue to hinder the sector. Airlines may rely on charters and fleet repositioning to meet demand spikes, particularly in high-growth corridors.
Potential Challenges and Opportunities
The freight industry is poised for a world of trouble and challenges in 2025. Some of these include capacity constraints, driver shortages, and economic uncertainty. However, within the storm of these challenges, there will be opportunities that enable growth and innovation. Success in 2025 will belong to those who seize the moment — leveraging technology, tapping into emerging markets, and embracing sustainability. Bold collaboration and swift, strategic moves will transform obstacles into opportunities, setting the stage for innovation and growth.
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