Difficult market factors remain in effect for shippers, according to FTR’s Shippers Conditions Index

Key market metrics in the form of capacity and rates appear to be continuing to work against shippers, according to the most recent edition of the Shippers Condition Index (SCI) from freight transportation forecasting firm FTR.

FTR describes the SCI as an indicator that sums up all market influences that affect shippers, with a reading above zero being favorable and a reading below zero being unfavorable and a “less-than-ideal environment for shippers.”

For the month of August, which is the most recent month for which data is available, the SCI was -6.5, which FTR said is a “sustained low level reflective of persistent capacity shortages and rising rates.”

FTR added that costs to ship goods in the current freight environment are expected to remain elevated, with truck rates seeing increases of 4 percent or more on the contract side, coupled with increasing railroad rates as that sector is seeing solid demand in tandem with capacity issues brought on by service issues. With freight growth expected to continue, FTR said it stands to reason that the SCI will remain in this current range going forward, with the caveat that freight growth remains intact at current levels.

“Shippers will continue to be squeezed as we move into the holiday season,” said FTR President Eric Starks in a statement. “The capacity situation for trucking is still tight and is not expected to ease back any time soon. Also, the railroads continue to have service issues, and their ability to pick up a significant amount of extra freight is constrained at the moment. We don’t anticipate any increase in service levels from the railroads until well after the holidays are over. The only positive that we see in the short-term is that fuel surcharges passed on to shippers is dropping rapidly as fuel prices drop. This is a welcome sight for shippers, as long as it does not telegraph a slowdown in economic activity that could hurt a shipper’s core business.”

Starks recently told LM that the driver shortage situation also remains an issue and is a major problem that carriers really cannot stress enough.

“We are kind of at an odd spot right now, because it really won’t take much of an economic pick up to push us back to that critical spot again where we were last winter,” he said. “If we start seeing the economy heating up at all, it could create some problems as things are already on the edge.”

On the trucking side, these challenging market conditions are, in some instances, leading to shippers prioritizing the need for putting a dedicated carrier plan in place. Although this is not a viable option for all shippers, due to the resources dedicated can require, it is becoming a viable option for those that have the means to do so and is likely to gain further traction, due to still tight capacity, the driver shortage, and industry regulations.