RXO flags ‘fragile’ TL capacity makeup entering 2026

Core Insights - The truckload spot market remains subdued in Q3, with modest peak season expected to limit rate increases in Q4, according to RXO's quarterly outlook [1] - Increased regulatory actions targeting non-compliant CDL holders could lead to freight rate volatility in the upcoming year [1] Spot Market Trends - TL spot rates (excluding fuel) increased by only 1.8% year-over-year in Q3, marking a third consecutive period of slowing growth, compared to 6.5% in Q2, 9.1% in Q1, and 11.6% in Q4 2024 [1] - The all-in rate index, which includes fuel, showed slight inflation in Q3 [1] Contract Rates and Market Dynamics - Contract rates rose by 2.1% year-over-year in Q3, an acceleration from the 1.1% increase in Q2 [2] - Shippers experienced high tender acceptance rates and easy capacity, while carriers faced significant cost pressures [2] - Spot rates have rebounded but have not consistently surpassed contract rates, indicating a lack of a TL market upswing [2] Capacity and Cost Pressures - The market is experiencing muted freight volumes, waning carrier capacity, and low spot rates that lack significant upward momentum [3] - Current TL rates are unlikely to decrease significantly, as carriers are facing rates similar to 2014 despite a 34% increase in operating costs [4] - The supply side is contracting, moving the market closer to equilibrium [4] Regulatory Impact - The market is showing early signs of tightening due to increased regulatory enforcement, including non-domiciled CDL restrictions and enhanced English language proficiency requirements [6] - Insurance companies may stop underwriting coverage for carriers with non-domiciled CDL holders, potentially driving this capacity out of the market [6]