TD Cowen/AFS Freight presents mixed readings for parcel, LTL, and truckload revenues and rates

The new edition of the TD Cowen/AFS Freight Index, which was recently released by New York-based investment firm TD Cowen Inc. and Shreveport, La.-based 3PL and freight audit and payment company AFS Logistics LLC, was somewhat mixed, with less-than-truckload (LTL) and truckload rates steady, and parcel rates being impacted by fuel surcharge increases and various accessorial charges amid lower demand.

The index made its debut in October 2021. The companies said that the objective of the quarterly Freight Index is to provide institutional clients of Cowen with predictive pricing tools for various sectors—including less-than-truckload (LTL), full truckload shipping (TL), and parcel shipping (separately focusing on express and ground).

The companies explained that the by leveraging AFS’s access to freight data across various modes, coupled with applying advanced analytics like machine learning algorithms, they have developed models that they said provide a complete picture of the data’s depth and richness. And they also highlighted how along with the large amount of historical data, they are evaluating and selecting current macro- and micro-economic factors, which are built into their historical models, which includes the most recent GRI (general rate increase) announcement from a major parcel carrier. What’s more, TD Cowen and AFS noted that the TD Cowen/AFS Freight Index offers what they called a unique and comprehensive review of both past performance and the forecasted outlook for the immediate future quarter.

“While truckload and LTL markets are largely a continuation of established trends, parcel carriers have unleashed a wave of key pricing changes to raise revenue,” says Tom Nightingale, CEO of AFS. “After significant discounting to compete for falling package volumes last year, UPS and FedEx have deployed accessorial charges as more covert tools to increase yields, with changes to fuel, demand and delivery area surcharges targeted to boost revenue.”

The TD Cowen/AFS Freight Index issued the following takeaways across the modes it covers:

• Ground parcel rates per package headed up from 23.8% in the fourth quarter to 28.8% in the first quarter, with increased fuel surcharge and higher average billed weight serving as the levers for the increase, and the second quarter ground rate per package index pegged to hit 29.3%, which would approach the all-time high reached in the first quarter 2023, at 31.0, and snap a stretch of three straight monthly declines. For express parcel, the report cited the effect of the GRI, fuel surcharge adjustments, a shift to more premium services, and higher average billed weight “more than offset” carrier discounting, with the average first quarter cost per package going from 0.9% above the January 2018 baseline in the fourth quarter to 3.9% in the first quarter, with the second quarter pegged to hit 4.1%, showing how carriers want to shift away from “significant discounting they had previously used in the fight for market share”;
• First quarter truckload rate per mile fell from 5.2% above the January 2018 baseline in the fourth quarter to 4.9%, with cost per shipment off 16.7% annually and 2.0% sequentially, which the report said was consistent with established trends as a greater share of short haul shipments drove down average linehaul cost. Second quarter rate per mile is expected to come in at 4.8%, which would mark a slight quarterly decline and its first annual increase going back to the third quarter 2022; and
• LTL rates are expected to continue to benefit from Yellow’s market exit in the third quarter 2023, at 59.4%, topping the January 2018 baseline and up 2.4% annually and up 0.1% over the first quarter, partially due to anticipated higher fuel surcharges related to global production cuts. Weight per shipment was off 4.6% annually and off 2.4% sequentially