Freight Index highlights persistent overcapacity, pricing shifts in Q1 2025

The TD Cowen/AFS Freight Index for Q1 2025 highlights continued challenges across North America’s freight markets, with truckload, less-than-truckload (LTL) and parcel sectors dealing with low demand and surplus capacity. The quarterly snapshot, which uses predictive pricing data, offers insights into ongoing trends impacting rates and market dynamics. 

Truckload 

Despite signs of upward momentum, truckload rates remain subdued due to persistent overcapacity. Spot rates and tender rejections are climbing, suggesting carriers are becoming more selective about loads, but these trends have yet to translate into higher contract rates. 

Truckload linehaul costs fell year-over-year for the eighth consecutive quarter but sit at 11.6 per cent above pre-pandemic levels. For Q1 2025, truckload rates are expected to remain flat, 5.1 per cent above the January 2018 baseline and marking only a 0.2 per cent year-over-year increase. 

“The current macroeconomic outlook has some positive signs for carriers,” said Andy Dyer, CEO of AFS. “But there’s no demand-side spark to shift the freight cycle, and the supply-side correction hasn’t reached the magnitude required to offset sluggish demand.” 

Less-than-truckload 

LTL rates have remained elevated since Q3 2023, bolstered by the capacity constraints created by the Yellow Freight bankruptcy. However, recent data suggests this pricing discipline may be weakening. 

In Q4 2024, LTL shipment costs fell 1.3 per cent quarter-over-quarter, outpacing a 0.3 per cent decline in shipment weight. Fuel surcharges from major LTL carriers dropped 3.4 per cent quarter-over-quarter, with net fuel surcharges per shipment falling 5.5 per cent. 

For Q1 2025, the LTL rate per pound index is projected to rise 0.4 per cent year-over-year, but the growth rate is slowing, reflecting tapering demand and competitive pressures. 

“LTL pricing has been resilient thanks to carriers’ sophisticated pricing models,” said Aaron LaGanke, vice-president, freight services at AFS. “However, low demand and FedEx’s decision to spin off its freight business could create opportunities for shippers seeking more attractive pricing.” 

Parcel 

In the parcel sector, pricing adjustments have had mixed results amid low demand and aggressive discounting. A newly introduced demand surcharge pushed ground parcel accessorial charges up 16.4 per cent in Q4 2024. Fuel surcharge changes also supported higher carrier revenue, with ground parcel net fuel costs rising 4.7 per cent quarter-over-quarter despite falling diesel prices. 

Carriers, including UPS, continue to adjust fuel surcharge structures, but discounting persists. Express parcel rates dropped on a year-over-year basis to just 0.5 per cent above the January 2018 baseline. While Q1 2025 is projected to see a seasonal boost to rates due to general rate increases (GRIs), the 4.1 per cent hike still represents a year-over-year decline, reflecting a full year of discounting. 

“Carriers are emphasizing revenue quality, indicating tighter pricing control as the year progresses,” said Mingshu Bates, chief analytics officer and president of parcel at AFS. “But the longevity of the current discounting environment is a key question for 2025.” 

Market outlook 

The TD Cowen/AFS Freight Index underscores the ongoing volatility in freight markets, shaped by subdued demand, overcapacity and evolving pricing strategies. As shippers and carriers navigate these challenges, the report highlights key opportunities and risks that will define the transportation landscape in 2025. 

The index uses data from over $39 billion in annual transportation spend, leveraging past performance and machine learning to project rate trends against a baseline of 2018 rates. 

ASF employs a team of more than 380 logistics teammates in eight major locations across the U.S. and Canada.