News / TPM: Declining shipments will drive consolidation in US LTL sector

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A gloomy outlook for demand and rates in the US trucking market will drive consolidation this year, unless a black swan event sparks consumer behaviour.  

Delegates at this week’s TPM25 by S&P Global in Long Beach, California, heard that analysts were becoming “less optimistic” about the US FTL [full truck load] and LTL [less-than truck load] market as the year developed.  

“We don’t think the sky is falling, but there’s hail out there,” said Lee Klaskow, senior analyst at Bloomberg Intelligence. 

“The impact from what’s going on in Washington will have significant effects on consumers because it is going to be inflationary… and we are kind of seeing that with the consumer confidence numbers, which have been trending in the wrong direction,” he explained.  

Mr Klaskow added that as well as B2C demand, there were also no signs of an increase in manufacturing for industries that would generate B2B demand. 

Geoffrey Muessig, EVP of Pitt Ohio, explained that two of the largest drivers of LTL activity were the automotive industry and home construction, the former likely to be “most subject to tariffs”, and the latter “muted at best, because of the high interest rates”. 

“We’re seeing all the publicly traded LTL carriers provide monthly tonnage data. Except for the ones that are in expansion growing their networks, they’re all in decline by big single digits,” he said. 

“As we prepared for this panel, I think we were a lot brighter than we are presenting here today. We’ve started to see a modest decline in shipment count, which we at Pitt Ohio didn’t experience last year.” 

And Mr Muessig added that because of this, “consolidation is going to continue to in the LTL space”. 

“We’ve been certainly a party to that over the last five years, acquiring companies, and we’re not alone. I think that that’s going to be a natural reaction if demand stays tepid. You might soon start to see something like 15 of the largest carriers now move 90% of the business.” 

He added that regional LTL carriers would also seek to “expand geographic territory” if they were in an environment “where demand is tepid”.  

Mr Klaskow concluded that a rate rise was unlikely “without some type of external demand fuelling that”. 

“I think we just need some sort of black swan event, that none of us here can think of, to happen to really spark that,” he said.