FTR Shippers Conditions Index points to tough stretch for shippers
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The market environment for shippers was largely negative in November, even while improving for the third straight month, according to the most recent edition of the Shipper Conditions Index (SCI) from freight transportation consultancy 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.”
The November SCI, which represents data for the most recent month available, was -6.0, which, while still in negative territory, showed growth for the third month in a row, following a low of 8.7 in August.
FTR said that the SCI will likely continue to moderate mildly as regulatory pressures are temporarily reduced because of freight multipliers due to a shift in the economic mix from industry to service, adding that anecdotal evidence indicates ongoing capacity tightness that stands as a negative for shippers.
“We are currently seeing things tighten up in the market, and it is not yet reflected in the November numbers,” said FTR President Eric Starks in a statement. “I would expect to see the SCI index weaken further as we move through the first quarter. This is not a good sign for shippers. The biggest concern right now is a tightening in trucking capacity. In early December, we saw a spike in capacity utilization and it was exacerbated by the recent storms. It will be interesting to see if the tightness continues as we start to approach February. If it does, then we will likely see a surge in shipping rates for all of 2014, as shippers typically put out bids and lock-in contract rates in the first quarter for the balance of the year.”
To what degree the anticipated rate surge would reach is unclear, but industry stakeholders have told LM that the market for carriers continues to gain traction, as evidenced by a strong spot market and the possibility that meaningful rate increases could stick.
A research note by Jason Seidl, transportation analyst for Cowen and Co. cited recent channel checks indicating an uptick in truckload demand and truckload rates improving, which, in turn, could lead to more shipper conversion from highway to rail to offset transportation expenses.
About the AuthorJeff Berman Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. Contact Jeff Berman
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