If the current freight climate continues, a number of freight brokerages—many of them large—will likely fail over the next year.

The current market presents a toxic combination of sluggish freight volumes and firming spot rates, which is the worst possible environment for freight brokers.

Understanding the Market Dynamics

Freight brokerages act as intermediaries between shippers and carriers, profiting from the margins between contract rates (what they charge shippers) and spot rates (what they pay carriers for immediate loads).

Brokers generally thrive under specific conditions:

Low volumes with declining spot rates

Stable volumes and rates

High volumes with declining spot rates

High volumes with surging spot rates

However, the current environment—characterized by low volumes and rising spot rates—flips this script, squeezing margins and exposing vulnerabilities.

Spot rates have been climbing as the compliance crackdown continues, taking bottom-feeder capacity out of the market. This is generating marginal increases in spot rates as the bottom of the market is washed out. But market conditions lack strong underlying support, with tender volumes down roughly 20% year-over-year and rejection rates remaining flat.

This softness in demand is compounded by gradual capacity tightening in the spot truckload market, where freight volumes remain weak amid a goods recession that is further eroding.

Normally, when spot rates increase, it happens because volumes are increasing relative to recent conditions. This demand shock allows brokers to reset their rates with their shippers, knowing that the shippers don’t have a ton of alternatives.

In this climate, that isn’t possible. Due to slow volumes, large asset carriers have plenty of available capacity and are willing to accept the loads on offer, so long as the rates are nominally higher than where they’ve been trending.

The general rates in the spot market haven’t increased substantially, but the bottom of the market is being eliminated, as it was mostly represented by motor carriers that weren’t compliant and were willing to violate the rules, such as driving 18-hour days, even when the rules state that a driver can only log 11 hours.