Transportation capacity falls faster in July, rates remain high

Although the transportation market cooled in July from a seasonally stronger June, it remained very tight, according to data from a monthly survey of supply chain professionals. Key transportation metrics in the Logistics Managers’ Index showed mixed results, with capacity falling faster while pricing grew at a slightly slower pace.

The index is a diffusion index in which a reading above 50 indicates expansion, while one below 50 signals contraction. The LMI displayed a 28. 4 reading for transportation capacity in July. Sentiment around capacity declined at a rate that was 2.

4 percentage points faster than June, tying the second-fastest contraction rate captured by the 10-year-old dataset. (The record-low reading was 23. 8 in September 2020.) A push by regulatory authorities to remove unsafe drivers has significantly tightened supply in the truckload market.

Further, most publicly traded carriers aren’t adding equipment, instead making better use of what they have. Recent initiatives to improve asset utilization were apparent in second-quarter results. Omaha, Nebraska-based Werner Enterprises (NASDAQ: WERN) announced an official restructuring of its one-way TL fleet in February.

The plan involved exiting non-profitable accounts and repurposing or disposing under-utilized tractors. Revenue per truck per week (excluding fuel surcharges) jumped 28% year over year in the latest quarter, as miles per truck were up 16% and revenue per total mile increased 10%. It expects rate per mile to increase by 10% to 13% y/y in the third quarter.

The carrier’s one-way fleet was 34% smaller in the quarter, which helped improve its total TL segment adjusted operating ratio by 270 basis points to 94. 5%. While that was roughly 10 points worse than the prior peak, it was the unit’s best margin performance since the 2023 fourth quarter. SONAR: Outbound Tender Rejection Index (OTRI.

USA) for 2026 (blue shaded area), 2025 (yellow line), 2024 (green line) and 2023 (pink line). A proxy for truck capacity, the tender rejection index shows the number of loads being rejected by carriers. Current tender rejections show a tight truckload market. To learn more about SONAR, click here.

The Tuesday LMI report showed transportation utilization (65) was 9. 7 points lower than June, but remained elevated by historical standards. Growth in transportation prices (86. 9) slowed 5. 5 points but remained at a “very robust expansionary rate.”

“The lack of available fleet capacity has caused the lead time for tender bookings to increase,” the report stated, citing SONAR data. “In late July bookings were being made at an average of 3. 74 days before the tender needs to move, up 11% from the same time last year.”

Werner noted one-way contractual bid negotiations are returning some of the strongest increases in a decade. Green Bay, Wisconsin-based Schneider National’s (NYSE: SNDR) one-way fleet captured double-digit rate increases on contract renewals in the quarter.

It said mini-bid activity is up as shippers grow more concerned with securing capacity for peak season. Schneider has increased its exposure to the spot market, noting June closely resembled March 2021, the prior cycle peak. It believes the TL market is “only in the early stages of rate recovery.” SONAR: Van Contract Rate Per Mile Index (VCRPM1.

USA) for 2026 (blue shaded area), 2025 (yellow line), 2024 (green line) and 2023 (pink line). The index shows a 7-day moving average of the initial reporting of dry van contract rates without fuel or accessorial charges. Supply chain costs remain elevated The overall LMI (68. 9) was down 2. 2 points from a four-year high in June.

Even with the modest step down, the index is on track for the highest annual reading since the freight market’s boom cycle in 2021. Inventory levels (55) were down 5. 5 points in the month, with downstream companies, like retailers, registering an almost 20-point decline into contraction territory at 46. 3.

Upstream respondents (manufacturers and wholesalers) reported little change, returning a reading of 59. “This seems to support the hypothesis laid out last month that some of the surge in imports was due to retailers rushing some goods imports ahead of new potential tariffs,” the report said.

“It is not clear if there will be a repeat of what we saw last year where the bulk of this inventory was held Upstream at the wholesale level and then only pulled down right before the holiday shopping season.” Even with the slowdown in inventory growth, inventory costs (77) grew at a “very robust rate,” up 1. 1 points from June. Warehousing capacity (46.

3) was down 1. 2 points, pushing warehouse prices (75. 5) up 1. 7 points to the second-highest reading since July 2022, “the height of the post-covid inventory bullwhip.” The readings showed a much tighter warehousing market for upstream companies. Warehouse prices were 12 points higher at the wholesale level of the supply chain.

Aggregate logistics costs (inventory, warehousing and transportation) were down 2. 6 points to 239. 5 in July. May’s 250. 9 reading marked the fastest rate of expansion for the all-in cost dataset since March 2022. Logistics managers surveyed expect the transportation market to remain very tight over the next 12 months, returning future readings of 40.

4 for capacity, 71. 8 for utilization and 89. 2 for pricing. The outlook pegged inventory levels at 64. 4 one year out, with inventory costs (77. 6) and warehouse prices (76. 3) showing no retreat. “Essentially, respondents are anticipating having to fit increasing inventories into tighter capacities at higher costs over the next 12 months.”

The LMI is a collaboration among Arizona State University, Colorado State University, Florida Atlantic University, Rutgers University and the University of Nevada, Reno, conducted with the Council of Supply Chain Management Professionals. Why it matters? The Logistics Managers’ Index provides a look at all major supply chain cost buckets.

The latest report signals a difficult operating environment for shippers characterized by tight capacity and growing cost pressures. More FreightWaves articles by Todd Maiden: • July’s 55.

6% PMI highest in 4 years; LTL carriers getting bullish • Schneider National pushes price amid market imbalance • Saia’s Q3 margin guidance disappoints investors The post Transportation capacity falls faster in July, rates remain high appeared first on FreightWaves.