Capacity continues to exit the market, leading ACT Research to conclude the market is coming into balance. But spot market rates continue to be mostly flat, with refrigerated carriers seeing the sharpest declines.

Meanwhile, Class 8 orders surprised with their strength in February, though most carriers are buying at replacement levels and not looking to add capacity.

Class 8 orders surprise to the up side

Preliminary data from FTR shows 25,700 Class 8 trucks were ordered in February, up 11% year over year. It exceeded seasonal expectations and nullifies concerns that demand would rapidly deteriorate in 2024, the industry forecaster reported.

“Build slots continue to be filled at a reasonable rate,” said FTR chairman, Eric Starks.  

“With February orders coming in at a rate that was comparable to December 2023, the market is still performing at a solid level. It was a mixed market for OEMs this month with some seeing increases and others seeing decreases in orders. Despite the weakness in the freight markets that has persisted for more than a year, fleets continue to be willing to order new equipment. Order levels were above the historical average and above seasonal trends, but our expectations for replacement output by the end of this year remain unchanged.”
For its part, ACT Research reported 27,700 Class 8 orders.

“Weak freight and carrier profitability fundamentals, and large carriers guiding to lower capex in 2024, would imply pressure in U.S. tractor, the North American Class 8 market’s largest segment,” said Kenny Vieth, ACT’s president and senior analyst. “While we do not yet have the underlying detail for February order volumes, Class 8 demand continuing at high levels again this month suggests that U.S. buyers continue as strong market participants.”

In terms of medium-duty order activity, Vieth said: “Classes 5-7 net orders were 18,800 units in February, up 7% year over year.”

Spot market rates flat

Truckstop and FTR Transportation Intelligence reported little change in spot market rates for the week ended March 1. But the news was worse for reefer carriers, who saw rates for that segment continue to slide.

Van rates saw a slight uptick on the week, while reefer rates fell for the sixth straight week to their lowest level since May 2020 (with the exception of a couple weeks last April).

A small decrease in truck postings coupled with higher load postings resulted in an increase in the Market Demand Index (MDI) to 65.0, which is the highest level in five weeks, the companies reported. However, MDI performance is highly varied by equipment type, they add. The flatbed MDI was the strongest since July 2022 except for an outlier in May 2023 due to the annual International Roadcheck inspection event.

Capacity continues to exit market

ACT Research recently offered an update on the freight markets, noting volumes were up slightly in January from December levels.

“Freight demand continued its gradual recovery in January with just the fifth reading at or above the neutral 50 level in the past 22 months,” noted Carter Vieth, research analyst. “The improvement may be partly temporary due to the cold snap.”

Capacity continued to contract,” Vieth added. “For-hire capacity has contracted in seven of the past nine months, and with many large fleets lowering capex budgets in 2024, plus delaying additions, capacity declines are likely to continue.”

“Six months of green shoots suggests a more balanced market in 2024, after 17 months in a loose market balance,” Vieth concluded.