The freight market is undergoing a significant shift after a prolonged freight recession that began in 2023 and pushed thousands of small carriers out of the industry: capacity is tightening due to regulatory pressures and driver challenges rather than a broad demand recovery. Recent Q2 earnings from major carriers — including Knight-Swift, Werner, and J.B. Hunt — confirm that supply-side constraints, diverging spot rates and diesel prices, and structural regulatory forces are reshaping the trucking landscape in ways that affect shipping costs across the supply chain.

Spot Rates and Diesel Prices Diverge

Truckload spot rates and diesel prices are moving in opposite directions, a divergence that supports the thesis that tight capacity — not fuel costs — is sustaining elevated freight rates. The FreightWaves Sonar National Truckload Index (NTI) sat at $3.51 per mile as of the latest reading, climbing back from a mid-to-late June low near $4.90. Meanwhile, the diesel price at truck stops (DTS) registered $3.48 per gallon, down from a July high near $3.80.

This spread signals that carriers are holding rates firm even as fuel costs ease. As one FreightWaves analyst noted on a recent broadcast, pricing in irregular route one-way markets is supply-and-demand based, not determined by underlying costs. The thesis has been that carriers can recover rising fuel costs in spot rates because capacity has remained tight — and even if diesel prices fall, spot rates would remain elevated. Current data is bearing that out, with the two metrics heading in different directions in the most recent week.

Tender Rejections Remain Elevated Across All Modes

Tender rejections remain well above historical norms across all modes, according to Sonar data. The Sonar Truckload Rejection Index (STRI) stands at 14.36%, down slightly week over week but still well above the six-month average of approximately 10.9%.

• Flatbed remains the tightest and most volatile mode at 23% tender rejections, down sharply from the 40% range observed in June and early July but still historically elevated.
• Reefer rejections sit at 19.46% — nearly one in five loads — easing slightly from around 20% but remaining exceptionally high.
• Van is the most moderate mode, yet rejection levels are still running nearly 50% above year-ago figures.

Every mode has cooled somewhat from its summer peak, but the market remains tight. There is a clear lack of available capacity, and conditions are far from loose.

Carrier Earnings Reinforce the Capacity-Constraint Narrative

Recent Q2 earnings reports from major carriers are reinforcing the capacity-constraint narrative.

Knight-Swift reported that its truckload segment operating income rose 69% year over year, with the carrier noting that strategic pricing recovery accelerated in June as recent bids took effect and that more gains were expected in July. The company described a rapid tightening in supply-driven dynamics, with spot rates rising significantly and exceeding normal seasonality, and tender rejections reaching levels not seen since 2021. Improvements in revenue per truck per week and overall rates are allowing carriers to drive better utilization. Notably, trucks are not being added to large fleets; carriers are simply operating more efficiently with existing equipment at better rates.

Werner addressed the issue directly. The company discussed regulatory pressures removing so-called "shadow capacity" as electronic logging device (ELD) providers exit the market, alongside ongoing driver and commercial driver's license (CDL) school removals — impacting both capacity and the quality of driver availability. ELDs, mandated since 2017 to electronically enforce hours-of-service limits, have been a tool for federal regulators to identify and remove non-compliant operators. CEO Derek Leathers said the company's organic dedicated business is growing. Werner's acquisition of First Fleet drove part of its margin improvement and added truck count.

Revenue improved for both Werner and J.B. Hunt in their dedicated and truckload segments. However, the gains are coming from mode shift and share shift rather than a broad demand recovery. J.B. Hunt reported significant intermodal growth, and strong intermodal results appeared across carrier earnings broadly, reflecting shippers' growing reliance on rail-based alternatives as truck capacity constrains.

Nuclear Verdict Exposure Reshaping Shipper Behavior

Rising nuclear verdict exposure — court judgments in commercial trucking accident cases that routinely reach eight or nine figures, driving sharp increases in carrier insurance premiums — is also reshaping shipper behavior. Shippers are increasingly moving freight to well-established asset-based carriers to limit liability, fraud, and cargo risk. This dynamic is expected to benefit carriers with large dedicated fleets through the remainder of 2024 and into 2025.

Driver Recruiting Headwinds Intensify

Driver recruiting challenges are intensifying the capacity squeeze from multiple angles. A tight market gives drivers more options, while regulatory enforcement is raising barriers to entry and complicating retention efforts. The regulatory story is not merely background noise — it is fundamentally changing the industry, showing up in available capacity and in the ability to recruit, train, and retain drivers.

Outlook: Tight Capacity for the Long Haul

Demand is remaining relatively stable. Rejections remain elevated even as they cool modestly — a pattern expected to continue through July and August. If normal seasonality returns, conditions could tighten further heading into fall.

With capacity continuing to exit the market and no significant fleet additions visible in large-carrier earnings, the market is expected to remain tight through fall and into the next year. As one FreightWaves analyst summarized on the broadcast: "I think we are in it for the long haul as far as capacity being tight for quite a while."

Source: FreightWaves