Is the freight recession over? That is a question that is often asked in the logistics industry and one that is very difficult to answer. The downturn, which started in 2022 and continues deep into 2024, has wreaked havoc in the freight shipping industry, causing many carriers to close their doors and sending shippers looking for solutions to move their products efficiently.
Many leading industry insiders and news sources like FreightWaves, have concluded that we have reached the bottom — meaning there is no expectation that things will get any worse. In fact, there has been a slight uptick in freight shipment volumes and the industry seems to be slowly moving in a positive direction.
Freight Rates Remain Low As We Look To 2025
What's important to remember is that COVID created a boon for the freight shipping industry since people were largely at home and ordering products like never before. Capitalizing on this trend, many new carriers entered the market and now find themselves with no product to move as purchasing trends are back to pre-COVID levels. So, while freight rates might be lower and favor shippers these days, businesses do need to understand that lower rates can sometimes bring about an undesirable level of service from some carriers.
It's not all bad news, however. Although we are not even close to COVID-level freight shipping volumes, we are on pace and potentially even slightly above the years proceeding COVID and many see 2025 as the year the freight shipping industry rights itself.
Fraud on the Rise Amidst the Freight Recession
While we may not know exactly when the freight recession will end, there are still issues that have developed since the downturn that shippers need to understand. In particular, companies have seen an increase in fraud. Since the shipping industry has been in the news and talked about more often since the recession started, shipping swindlers have targeted it with criminal behavior.
A couple of examples include:
- Carriers posing as legit operations and stealing freight.
- Carriers sending invoices for shipments that never existed.
- Individuals doctoring documents to appear as another company.
- Phishing scams where criminals use near-identical email addresses as other companies.
- Scammers posing as actual employees of companies and conducting fraudulent business.
- Carriers booking loads as if their company will move the shipment, but then double brokering it to another carrier which they never pay.
It has become such a concern that insurance companies have started to increase their premiums. There are things you can do, however, to protect yourself, including:
- Purchase insurance in case fraudulent activity does occur.
- Make a positive identification of the carrier and driver that arrives to pick up your freight.
- Be sure email addresses and phone numbers are exact matches to those you do business with.
Working with a third-party logistics (3PL) provider can help you develop strategies to remain profitable and keep your shipments on the road — safe and sound.
What factors indicate the freight recession is over?
As we wait to see what 2024-25 will bring to the logistics industry, there are indicators that can tell us when the freight recession is easing a bit. The end of a freight recession is typically marked by a sustained recovery in demand, stabilization of prices, and an improvement in the financial health of freight companies. Let's take a look at the main indicators:
Economic indicators
- GDP growth: A consistent increase in Gross Domestic Product (GDP) suggests economic expansion, which usually leads to increased manufacturing and retail activities, thereby boosting freight shipping demand.
- Consumer spending: Recovery in consumer spending can indicate that the freight recession is easing, as more goods need to be transported to meet consumer demand.
- Business investment: An increase in business investment in capital goods indicates confidence in economic conditions, which can lead to more freight shipments.
- Trade volumes: Recovery in import and export volumes can also signal the end of a freight recession, reflecting improved global trade conditions.
Industry-specific indicators
- Freight rates: Stabilization or an increase in freight rates can indicate a recovery, as it suggests that demand is picking up, allowing carriers to charge more for their services.
- Freight volume: An increase in freight volumes, as reported by transportation companies and ports, is a direct indicator of industry recovery.
- Capacity utilization: Higher utilization of available transportation capacity (trucks, ships and trains) suggests increased demand and can indicate that the industry is moving out of a recession.
- Financial health of freight companies: Improvement in the financial results of major freight companies, including revenue growth and profitability, suggests the market is moving in a positive direction.
Global factors that impact freight recessions
- Trade agreements: New or revised trade agreements can boost trade volumes and, consequently, freight demand.
- Geopolitical stability: Improved geopolitical relations can lead to smoother trade flows and higher freight volumes.
- Global economic trends: The economic health of major trading partners also affects the freight industry. Recovery in key markets like the United States, China, and Europe is crucial for global freight demand.
Freight Recession Challenges and Opportunities
While the end of a freight recession can signal a return to growth, companies must navigate challenges such as fluctuating fuel prices, regulatory changes, and the need for skilled labor. However, there are also opportunities in expanding into new markets, innovating in service offerings and enhancing supply chain resilience.
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