Freight rates remain persistently low, and the market’s supply‑demand balance is yet to be restored. When will spring arrive for the freight industry?
Release date:
2023-06-14
Author:
Jinhua Logistics
“Poor market conditions and low freight rates” have become a shared source of anxiety among truck drivers lately. Bearing the burden of supporting their families and repaying loans, many drivers can’t help but wonder: when will spring finally come to the freight industry?
“Poor market conditions and low freight rates” have become a shared source of anxiety among truck drivers lately. Bearing the burden of supporting their families and repaying loans, many are sighing: when will spring finally come to the freight industry?
The total volume of road freight has declined significantly.
The abundance of vehicles and the scarcity of cargo are the main reasons for the slump in freight rates.
The abundance of vehicles and the scarcity of cargo, resulting in supply exceeding demand, is the fundamental reason for the ongoing slump in freight rates—this is evident from… As shown by the trend chart of China’s total road freight volume from 2011 to 2022, official data reveal that road freight volumes began steadily increasing in 2011, reaching a temporary peak at the end of 2019 with 41.6 billion tons—nearly 50% higher than in 2011. However, starting in 2020, China’s total road freight volume began to decline, and by 2022 it had fallen back to a level comparable to that of 2017.
As The “order drought” is spreading globally, and with shipping capacity gradually recovering, the supply‑demand gap is narrowing, driving freight rates to near rock-bottom levels.
According to reports, while demand for road freight is declining, trucking capacity continues to expand. Data from the Ministry of Transport show that, In 2016, the national truck fleet numbered 13.51 million vehicles, declining to 11.73 million by 2021. While the number of trucks appears to have decreased, the total tonnage carried has risen sharply, increasing from 108.27 million tons in 2016 to 170.99 million tons in 2021. The growth in large‑capacity trucks has reduced the demand for a larger vehicle fleet.
On the other hand, in Under the policy framework of the Three-Year Action Plan for Adjusting the Transport Structure, initiatives such as shifting freight from road to rail and from road to water have directly led to a sustained decline in the share of road freight. Data show that in 2018, road transport accounted for 78.2% of total freight volume across all modes, maintaining its dominant position within the integrated transport system. However, by 2020, the road‑transport share had fallen to 73.8%, while the railway freight share rose from 7.8% in 2017 to 9.2% in 2021; meanwhile, waterway freight volume increased by 23.4% compared with 2017.
Manufacturing industry PMI has declined for three consecutive months, with reduced supply causing “water levels to drop and ships to lower.”
On May 31, according to the China Purchasing Managers’ Index (PMI), in May, the manufacturing PMI, the non-manufacturing business activity index, and the composite PMI output index stood at 48.8%, 54.5%, and 52.9%, respectively—down 0.4, 1.9, and 1.5 percentage points from the previous month. All three indices have declined to varying degrees for two consecutive months, with the manufacturing PMI falling for the third straight month.
Logistics has long served as a barometer of the national economy. Since the beginning of this year, freight rates for bulk commodities have continued to decline. As short-haul truck driver Master Wang put it with a sigh, Freight rates within 50 kilometers have fallen five times since the beginning of the year, with rates dropping from 20 yuan per ton to the current level of 15 yuan per ton.
“For the same routes, freight rates today are 30% to 40% lower than they were a decade ago. For shipments from Anhui to Shanghai, the rate was roughly 120 yuan per ton ten years ago, whereas now it stands at 80 to 90 yuan per ton,” remarked the owner of a logistics company.
The plunge in freight rates is, in fact, This is a direct manifestation of “too many trucks, too little cargo, and supply exceeding demand.” Over the past three years of the pandemic, coupled with a volatile international environment, foreign trade has been severely impacted, leaving many freight yards crowded with idle trucks. Since the beginning of this year, the logistics market has been in a transitional phase of volatile recovery, with the shortage of cargo volumes still far from being significantly alleviated. A sudden drop in available freight has led to a sharp decline in load opportunities for truck drivers on both inbound and outbound routes, naturally driving down freight rates.
According to this year’s The “2022 Survey Report on the Employment Conditions of Truck Drivers,” released in March, indicates that 60.39% of truck drivers attribute changes in freight rates primarily to a shortage of cargo.
The primary reasons for the downward pressure on freight rates, analyzed from both the supply‑side and demand‑side perspectives, can be summarized into three key factors. First, as market capacity recovers while cargo volumes decline, freight rates fall. Second, weak external demand, industrial relocation, and the slow recovery of domestic production capacity all contribute to this trend. Third, accelerated market consolidation is clarifying the competitive landscape across the shipping industry.
Experts have pointed out that it is essential to promote the rationalization of costs and freight rates. This requires strengthening supply-side adjustments to reduce ineffective, non-compliant, and untrustworthy supply; elevating the quality of supply; striking a balance among cost, service, and safety; and ensuring that high-quality goods are offered at fair prices. Furthermore, optimizing supply‑chain logistics and leveraging platform mechanisms can help guide and regulate the flow of transport capacity, alleviate excess capacity in overheated regions, and achieve a better equilibrium between market supply and demand.
Industry analysts point out that the current slump in freight rates is, in fact, a process of industry consolidation. However, this is merely a temporary setback; as market dynamics evolve and relevant national policies are implemented, freight rates will eventually stabilize at a certain level. With the favorable trend of “dynamic equilibrium,” spring is finally on the horizon for the freight industry.
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