Less-than-truckload rates hit a new high in the third quarter and are expected to finish the year even higher, according to a report from AFS Logistics and financial services firm TD Cowen.
The LTL rate-per-pound component of the TD Cowen-AFS Freight Index finished the third quarter 78.8% above its January 2018 baseline. That was 11.9 percentage points higher year over year and 1.1 points above the second quarter. The dataset is expected to end the fourth quarter 82.5% above the 2018 benchmark, which would be 14.7 points higher y/y.
High diesel fuel prices and extant “carrier pricing power” are driving the increases. The 80%-plus rate jump over an eight-year period also highlights the severity of cost inflation across carrier P&Ls (wages, health insurance, liability insurance, maintenance, etc.).
The dataset’s fuel surcharges were 79% higher y/y in September. Actual retail diesel prices were up y/y by 31% in July, 46% in August and 68% in September. (Less-than-truckload fuel surcharge mechanisms include a step function as diesel prices rise, resulting in margin accretion.)
Large public carriers have been able to capture mid-single-digit contractual rate increases through the downturn. Many are also pulling forward general rate increases given favorable sector fundamentals. Rate hikes on noncontractual LTL business used to occur annually. The cadence had been shortened to 11 months in recent years. Saia (NASDAQ: SAIA) installed a 7.1% GRI on July 6, which was 120 basis points higher and three months earlier than its 2025 increase.
The report showed LTL cost per shipment declined 2.8% sequentially (5.3% higher y/y) in the third quarter, as weight per shipment fell 3.4% (down 2.3% y/y), implying rate per pound was 0.6% higher (7.6% higher y/y).
Linehaul rates were 1.2% higher sequentially in the quarter even though length of haul declined 2.2%.
Public carrier data has diverged from the index somewhat in recent months.
Tonnage among publicly traded LTL companies inflected positively y/y in March, with growth rates continuing to accelerate since. Mid-quarter updates from the group also showed y/y increases in weight per shipment during July and August, with XPO (NYSE: XPO) being the lone outlier. XPO’s freight mix now includes more shipments from SMBs, which tend to be smaller but carry better margins.
The group has indicated that the improved shipment weights result from freight previously lost to the truckload market returning to LTL networks as TL rates rise. Also, manufacturing activity has remained in growth territory in every month this year. The Institute for Supply Management’s Manufacturing PMI registered a 54.5 reading in September, with the new orders dataset logging a 55.3 reading. (A reading above 50 signals expansion, while one below 50 indicates contraction.)
Supply-side correction fueling TL rate surge
The TL rate-per-mile component of the index was 19.7% above the January 2018 baseline in the third quarter, 13.7 points higher y/y and 3.3 points above the second quarter, “as continued regulatory action, carrier exits and fuel shocks squeeze available capacity.”
The index is expected to increase to 23.4% above the benchmark during the fourth quarter, which would be 15.8 points higher y/y and the highest level registered since the 2022 first quarter.
The third-quarter earnings season begins Thursday when J.B. Hunt Transport Services (NASDAQ: JBHT) reports results after the market closes.
AFS Logistics is a non-asset-based 3PL providing audit and cost management services, managed transportation, and freight brokerage. It manages over $11 billion in transportation spend.
Why it matters? The TD Cowen-AFS Freight Index provides a rare look at past and future LTL rates. The dataset confirms key industry trends, including LTL rates hitting new highs in the third quarter and expected increases in the fourth quarter, driven by high fuel prices and carrier pricing power.
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