SAN DIEGO — The antitrust legal boilerplate, read or posted at every session of the Transportation Intermediaries Association’s annual Capital Ideas conference, had a clear message: Don’t talk too much about truckload rates.

But how is this avoidable in a market where these rates are falling after a historic 2021? Noel Perry, TIA’s chief economist, gave the conference’s closing insight into the declining market that band members will face as they leave San Diego — a message that might have been different a few months ago to sadness.

Or maybe not. As Perry noted, rates during the 2021 surge far exceeded the growth rate of other key freight metrics, such as volume. “We are well above normal,” he said, putting excess demand at 26%.

“It can’t be sustained long term,” he said. “We live with a full truckload market that is under extraordinary pressure to get back to normal.”

The irony is that while 2021 has been a big market for freight, average broker rates have remained relatively flat over the year. The gross margin percentage of brokerages with more than $100 million in revenue, according to the TIA, was 13.5% in the fourth quarter of 2021. A year earlier, it was the same. For the industry as a whole, the average margin ended 2020 at 13.4%. It reached 14% in the third quarter before falling back to 13.4% in the last quarter.

This stability in margins even as rates increased demonstrated that even though brokers had a higher base number in their bills, their profit percentage was not increasing.

But given the high average bill size in 2021, Perry told the audience, “You had an extraordinary and unusual year last year.”

The bill per load for the entire brokerage industry, according to the TIA, rose from $2,004 in the fourth quarter of 2020 to $2,558 in the fourth quarter of 2021.

In the second quarter of 2020, which included the early days of the pandemic and falling spot rates, the average bill was $1,564, according to the TIA. But during this quarter, the average margin for brokers was 16.1%, the highest level of any quarter in recent years.

However, just a quarter later, in the third quarter of 2020, as the trucking market began to rebound, margins averaged 10.2%, according to TIA data.

The tightness of the market in securing capacity is starting to diminish, “and even if traffic doesn’t go down, price pressure is likely to ease,” Perry said.

(The SONAR Outbound Tender Volume Index shows a significant drop in freight volume).

Addressing a room full of brokers who regularly search for capacity via loading panels with transparent offers, Perry told the audience that “the spot prices you show on the internet are back to normal.”

(Truckstop.com’s national seven-day dry-van rate, as published by SONAR, was $3.83 per mile on Jan. 9, its recent peak. On April 3, it was $3.29.)

“This market is moving in a profoundly different way,” he said. “If you were shippers, you’d be standing clapping.”

But brokers also work with carriers, and as Perry said, “you have to keep those two people together.”

“You won’t get the results you had last year by behaving the same way,” he said.

Brokers were – and are – in the middle of trying to secure constrained capacity, and Perry addressed this while dismissing the idea that there is a shortage of drivers.

Reviewing the increase in freight volume, Perry noted that in an average year, just to stay stable, the trucking industry needs to get 1 million new hires. Perry said with volume 26% higher than normal, “there is no carrier in the country that has the capacity to recruit to add 26%.”

The extraordinary freight volume has been the cause of the shortage of drivers, according to Perry. “When we talk about a shortage of drivers, it’s a surplus of demand,” he said. “It’s not all of a sudden that we can’t hire truckers.

Recruitment efforts going forward will be in a market where Perry said there will be no growth from current levels in the truckload and intermodal sectors, and little or no growth LTL traffic.

“These are conditions you’re going to have to get used to,” Perry said. “How do you make money when traffic isn’t going up and is more likely to go down?”

During the Q&A session, the panel was asked about the impact on freight markets of a significant “relocation” of manufacturing capacity to the United States.

Perry said there could be negative impacts on ports and intermodal transport that carries freight from overseas.

But Mark Christos, vice president of Matson Logistics, said relocation could help reduce the impact of what he called “deficit markets”. These are regions where the movement of goods in the region is important, but there are not many exits.

If the economic activity created by reshoring goes into some of the loss-making markets, “it could have a huge impact,” Christos said. Trucks now coming out of these empty regions may instead be full, and “as an industry, we may need more capacity.”

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