FTR data points to improving trucking market conditions
February 02, 2011
As the economy shows some signs of improvement, the trucking market may be somewhat ahead of the curve, according to the most recent edition of the Trucking Update by FTR Associates, a freight transportation forecasting firm.
In the Trucking Update, FTR stated that its Trucking Conditions Index (TCI), which reflects tightening conditions for hauling capacity, increased to 7.1 percent in January, marking its highest recorded level during the economic recovery.
The TCI is comprised of various metrics, including capacity, fuel, bankruptcies, cost of capital, and freight.
Company officials added that the TCI is likely to increase throughout this year and may hit a new record in early 2012, noting that current readings, coupled with the forecast for the next few years, “bodes well for increased vehicle utilization and solid pricing power for carriers through the period.”
“The biggest thing we are looking at is the tightening of capacity,” said FTR President Eric Starks in an interview. “As CSA (Comprehensive Safety Analysis) continues to get implemented and pulls more and more drivers out of the system, it is keeping the carriers honest and pushing them to make needed changes now rather than later. It is impacting the driver pool and starting to tighten capacity. If you don’t get the right driver to put into a truck, the truck gets parked and carrier networks are then not running active capacity.”
Given the CSA situation, coupled with likely changes to truck driver Hours-of-Service, Starks said that capacity is likely to be tight for the balance of this year. And by the end of the year he said there will be 100 percent utilization of active vehicles in the marketplace, meaning that every available truck driver will be on the road moving freight.
This high level of equipment utilization will also drive rates up, said Starks.
Tightening capacity at the moment, said Starks, is more of an issue on the truckload side than the less-than-truckload (LTL) side, although he noted there are some signs of capacity imbalance on the LTL side but not to the level seen for truckload.
“The pressure is mainly on the truckload sector,” he said. “As business activity picks up, though, we think the LTL sector will be impacted, too. The freight environment in the fourth quarter was somewhat stagnant, but as things move forward it will accelerate through this year and that is a good thing.”
Another factor weighing into the overall trucking outlook is fuel, which continues to move higher and can become a negative if it is not budgeted correctly, explained Starks. And even with the noticeable progression in price increases in recent weeks, it is not a major hindrance at this point.
For more articles about FTR Associates, please click here.
Subscribe to Logistics Management magazine
entire logistics operation. Start your FREE subscription today!