After over 30 years in the logistics business, the experts at Shaker Logistics have seen and weathered every market condition out there. This past year, the freight industry has been handling fallout from the COVID-19 pandemic, crumbling infrastructure from a string of natural disasters, import fluctuations due to union strikes, and economic uncertainty around election season. With a new political party in the executive seat and the typical swing of the freight market, shippers will be impacted by changes in carrier rates and service. But what can shippers expect, and how can they prepare? We sat down with Jason Smith, CEO of Shaker Logistics, to talk about the future of freight in 2025.
The Market, at Present
It’s easy to assume that since the general economy hasn’t been struggling, the freight economy is doing just as well. However, freight runs on its own volatile circuit that doesn’t always reflect the overall state of the economy. The freight market is like a pendulum, swinging between rates that favor carriers and rates that favor shippers. At the start of the global pandemic, the pendulum swung in favor of carriers. There was a surplus of freight (the demand) and not enough capacity to move goods (the supply). Carriers had the ability to charge higher rates or even refuse lower-paying freight to go for more lucrative loads elsewhere.
“What goes up must come back down,” Jason said. “The market pendulum made a hard swing in the opposite direction, bringing us to the freight recession we find ourselves in today. At a certain point people stopped spending money on hard goods and instead spent it on services, like vacations abroad. Meanwhile, the supply had been working hard to catch up to demand and new carriers flooded the market. With more trucks in the marketplace and less freight to move, carrier rates took a dive.”
Today’s low rates benefit shippers, with many cheap options available on the market, and carriers willing to negotiate even lower to secure a load. However, this isn’t the new normal. Shippers need to reconsider their carrier choices and prepare for the market to stabilize. In fact, the market is already correcting itself, but at a slower pace than industry experts are used to.
A Slow Recovery
There is still a surplus of carriers in the market, and they’re trickling out slowly, dragging out the length of this low period for carriers.
Even in a low market carriers need to keep their wheels turning. They are often willing to operate at a loss now because they’ll likely make their money back when the market recovers. This “weather the storm” mindset, combined with the savings carriers have from the high pandemic market, allows carriers to keep operating. But some carriers haven’t saved, some give up, and others are quickly running out of funds to stay afloat – yet they remain operational. Jason recognizes that banks are extending loans to allow carriers to stay on the market.
“Carriers are trying to cut costs and downsize, but the banks don’t want to repossess any equipment right now because it’s hard to sell without buyers. Carriers don’t have the funds to invest in expansion, even though they’ll want to when the market improves. To keep equipment off their doorstep, banks are restructuring loans and pushing out payment dates to give carriers more time to raise the funds, which extends this low period. It’s a vicious cycle, but it can’t go on forever. Fortunately, at Shaker we were very conservative about our rates and the way we structured our equipment acquisitions, so we’ve been insulated from some of the worst effects.”
Impending Presidential Policies
Although the freight market ebbs and flows somewhat independently of the general economy, it is still impacted by overarching factors like government policies.
It’s difficult to predict how a new administration will impact the market, but Jason believes that reading into the stock market can help shippers and other logistics partners know what to expect: “On the day it was announced that Trump won the election, big names in logistics saw a significant spike in their stock value. The biggest thing we can learn from this is that investors anticipate Trump’s policies being good for freight.”
While it’s too early to predict what impacts a new presidential administration will have on the freight and logistics industry, likely changes to tax law, the regulatory environment, and import policies could all feasibly result in an increase in the consumption of goods and therefore freight. More freight moving throughout the system could cause the market to tighten up, shifting rates back in favor of carriers.
“The stock market is known for forecasting the future, but it isn’t gospel. The only way to be certain of how the new administration will impact freight is to wait and see. We shouldn’t assume that the market will normalize, but this doesn’t mean we shouldn’t make preparations for a market turn. When you’ve been in the logistics game for as long as I have, you know to read every sign and make contingency plans for every outcome.”
Shippers, Prepare!
Eventually, with new policies in place and more carriers exiting the market, the pendulum will swing the other way, rates will favor carriers again, and the freight market will normalize. What will this mean for shippers?
A more robust freight market will demonstrate why cheapest is not always the best, and shippers paying low-end carrier rates will be vulnerable to losing service when the market tightens back up. Logistics specialists call exceptionally low rates like these “paper rates,” because when the market turns, those rates are only worth the piece of paper they’re printed on. Once rates start coming back up, carriers will have the option to refuse lower-paying loads to pursue more lucrative freight. Shippers looking for the cheapest carrier options will find their routing guides blowing up as carrier after carrier refuses the freight. Shippers could be left negotiating with a carrier they’ve never used before and may have to pay premiums to get last-minute coverage.
Jason advised that to avoid a complete loss of service, shippers should work closely with their third-party logistics partners now to ensure that they have the right carrier relationships in place, and expand their carrier base in vulnerable geographies or modes: “A true partnership is about loyalty. If a shipper has built a relationship with a carrier or a third-party logistics partner, they won’t go running as soon as the rates turn around. Reliable partners take turns helping each other out, negotiating to give each other fair rates in all market conditions. If you have a relationship to leverage, as a shipper, you can never lose service.”
Paying a few percentage points more for a logistics partner with reliable services that add value is well worth the cost for excellent communication, reliable equipment, and a driven team that is invested in the success of your shipment. When the market tightens, having those relationships with a reputable logistics partner will make all the difference in service and rates.
“Shippers,” Jason said, “this market is changing. Take the time now to build a loyal base of carriers and third-party logistics partners. Show your key partners some love, even if it means a few extra percentage points out of your pocket. Building these relationships and maintaining them will save you some headaches in the long run, no matter how the market looks.”
Shaker Logistics, Your Reliable Partner
Don’t let the market get the best of you. Contact Shaker Logistics today for inventive solutions and a passionate team who will stick by your side through all the highs and lows.