The current market outlook for shippers looks to be challenging in the coming months, according to the most recent edition of the Shippers Condition Index (SCI) from FTR, which was released last week.
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 August, the most recent month for which data is available, the SCI was -0.8, which was an improvement over July’s -1.3, and June’s -2.0.
FTR said that the current SCI level continues to show the “moratorium” in truckload rate growth during the summer months, adding that it is expected that market conditions will become more difficult for shippers in 2016 en route to the expected negative impact regulations are expected to have on capacity, with the regulatory crunch expected to be in full effect in 2017.
“Shippers are currently receiving the benefit of relatively slow growth in transport demand coupled with adequate transport capacity, resulting in a relatively placid peak season in 2015,” said Larry Gross, FTR senior consultant in a statement. “However, FTR continues to expect that conditions will tighten significantly beginning next year as the next wave of trucking regulations begins to hit. There is also the potential for congressional action as part of the possible highway trust fund reauthorization bill which is injecting another major element of uncertainty. Shippers would be well served to keep a close eye on the situation.”
Even though economic growth is not happening at the same pace it was earlier in the year, and capacity is not nearly as tight, the aforementioned level of uncertainty is having an impact on shippers’ supply chain operations from various perspectives, including strategy, planning, and procurement.
This, in turn, has seen shippers try to lock in more contractual pricing instead of spot pricing, with carriers able to leverage that into future capacity commitments.
Industry stakeholders have told LM that the next year could prove to be an interesting one for shippers, depending on economic growth levels and expected significant impact of industry regulations like electronic logging devices, and the possible resumption of motor carriers hours of service rules, among others.