TL Capacity Constraints Could Trigger Rate Volatility Next Year
RXO’s quarterly outlook painted a cautiously pessimistic picture for the truckload spot market in the third quarter, predicting a subdued peak season and a modest increase in rates during the fourth quarter. The company’s Curve report indicated that truckload spot rates, excluding fuel, rose only 1.8% year-over-year in the third quarter, marking a third consecutive period of slowing rate growth. This trend, alongside a slight inflationary increase in all-in rates, reflects the ongoing challenges facing the freight industry. Contract rates, however, did experience a 2.1% year-over-year rise during the same period, indicating a slight acceleration from the 1.1% increase observed in the second quarter. These figures highlight a market where growth is not uniformly distributed and where shippers and carriers are navigating a complex landscape.
The Charlotte, North Carolina-based RXO noted that shippers enjoyed relatively high tender acceptance rates and easy capacity throughout the third quarter, with only minor rate increases reported in their Request for Proposals (RFPs). Conversely, carriers faced significant cost pressure, a situation particularly pronounced given that rates are currently resembling levels seen in 2014 despite a 34% increase in their operating costs. The supply side of the market is also contracting, moving the industry closer to a state of equilibrium. The company’s data reveals that the market has remained range-bound since the third quarter of 2023, unable to sustain gains typically associated with seasonal events such as harvest seasons or Roadcheck. Moreover, while spot rates have partially rebounded, they haven’t been consistently able to overtake contract rates – a hallmark of a traditional truckload market upswing.
Looking ahead, RXO anticipates potential volatility in 2026, driven by significant structural changes within the U.S. carrier market. The company’s analysis suggests that ongoing capacity exits, coupled with increasingly stringent regulations targeting non-domiciled CDL holders and English language proficiency requirements, could accelerate these trends. Insurance companies may be unwilling to underwrite coverage for carriers with non-domiciled CDL holders, effectively removing this capacity from the market. This represents the “biggest structural change to the U.S. carrier market since industry deregulation in 1980,” according to RXO’s Chief Strategy Officer, Jared Weisfeld. The company’s assessment is that eventual spot rates will overtake contract rates, driving volatility as cash-strapped carriers attempt to improve profitability after a challenging period.
The market environment is currently described as “fragile,” with capacity significantly reduced compared to the previous two years. A modest rise in demand or further capacity exits could trigger rate volatility. Current tender rejections – a proxy for truck capacity – are not signaling a recovery; they remain well below prior-year levels. Contract load acceptance volumes are also subdued, continuing a trend of low levels. The Curve index, a seven-day moving average of linehaul spot rates excluding fuel, is expected to end the fourth quarter slightly higher than its current position, though rates are projected to remain inflationary. Shippers aren’t yet feeling “the squeeze in their routing guides” as spot rates have not yet provided a significant upside.
RXO, a leading truckload broker following its acquisition of Coyote Logistics last year, anticipates that the next peak in rates will likely resemble the conditions seen in 2014, rather than the significant gains experienced after the COVID-19 pandemic. Stability (or lack thereof) in trade policy, the extent to which drivers continue to leave the market, and the responses of both shippers and consumers to these factors will ultimately determine the trajectory of the freight industry. The company’s outlook underscores the complexity of the current market and the need for careful monitoring of various influencing factors.
