“I wouldn’t declare a recession over yet; we are in the throes of it now,” says Andrew Smith, senior vice president at Circle Logistics in the US.
This comes just four months after, in an exclusive interview with Locate2u News, Smith forecasted that there won’t be a ‘freight recession’ as widely speculated by industry analysts. He did warn that this year would be “more demand-driven” compared to the previous years’ supply-driven.
Smith says the freight sector is still “largely driven by oversupply today, but he does anticipate some movement in the industry. “I do expect we will move from being an oversupply-driven market to a demand-driven market, but that doesn’t mean demand is there,” he warns.
During the COVID-19 pandemic, supply chain issues created a ‘chain bubble,’ resulting in many companies receiving venture capital to take you out to the market.
“A demand-driven market would be regional pockets of tightness that spring up temporarily and cause some pain. It could serve as the precursor to a more cataclysmic ‘black swan event,’ which, at this point, still seems unlikely in the near future.”
Slight financial reprieve for the freight sector
According to the Wall Street Journal, “demand is growing, and freight rates are rising,” which signals that retailers are restocking inventories again. “I agree there has been a small uptick in demand; however, it is certainly not enough to compensate for the oversupply of trucks,” says Smith.
The US economy grew by 3.3% seasonally, according to the BBC. Growth has accelerated at a much faster pace than anticipated.
Is it enough to get excited about? “I have been cautiously optimistic about a rebound in truckload freight rates in 2024,” says an optimistic Smith.
However, the “big jump in diesel prices” is not something to monitor closely. “This could accelerate carrier exits and bring equilibrium back to the market faster than anticipated.”
Survival of freight businesses
Exactly a year ago, BBC reported about massive concerns in Australia around trucking companies facing closure. This was due to supply chain hurdles they faced. It was not isolated to Australia; America had significant misgivings about raising more capital during the pandemic.
But judging what Smith says, it seems far from over.
“I expect several small and medium-sized logistics service providers to get acquired or close their doors this year. Maybe a handful or larger M&A (mergers and acquisitions) as well, due to market conditions,” warns Smith.
“The industry continues to be plagued with both margin compression and cost pressure simultaneously.”
Freight outlook
According to Investing.com, the financial services firm Stephens reviewed Schneider National (NYSE: NYSE: SNDR). It decided to downgrade the stock from ‘Overweight to Equal Weight’. The value has remained unchanged at a price target of $28.
The transportation company has not performed as expected during the last few months, which Stephens attributes to the freight recession.
Last year, Locate2u News reported on the digital freight startup Convoy, which had closed down. It blamed a “massive freight recession” for its demise. Flexport ended up buying Convoy’s technology assets.
NOW READ: Trucking startup Convoy is shutting down; calls it a perfect storm
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Mia is a multi-award-winning journalist. She has more than 14 years of experience in mainstream media. She's covered many historic moments that happened in Africa and internationally. She has a strong focus on human interest stories, to bring her readers and viewers closer to the topics at hand.
