FTR Trucking Conditions Index taps the brakes on market growth

Signs of steady growth in the trucking sector may have proved to be premature based on the most recent edition of the Trucking Conditions Index (TCI) report from freight transportation forecasting firm FTR.

The TCI reflects tightening conditions for hauling capacity and is comprised of various metrics, including capacity, fuel, bankruptcies, cost of capital, and freight. According to FTR, a TCI reading above zero represents an adequate trucking environment, with readings above ten indicating that volumes, prices, and margin are in a good range for carriers.

For January, the most recent month for which data is available, the TCI was 9.05, which was down from December’s 10.88, which was up 2.24 percent from November, which was up 3.58 percent over October.

In describing current market conditions, FTR said that demand at current levels can be easily handled by current carrier capacity, with the caveat that it may not be lasting, due to what it called a “possible regulatory crisis” in 2018, which could potentially lead the TCI back to ten or higher in the later this year.

And FTR added that it is forecasting a modest recovery from weak January truck loadings, which it said will be in line with modest freight growth, adding that as the current economic recovery is extended, market conditions are slipping and becoming more volatile.

“Growth in the highly visible long-haul dry van segment has notably slowed and has actually been negative for the last year,” said FTR COO Jonathan Starks in a statement. “The data that has come out of the spot market for the last year highlights those results with capacity much looser and rates down. However, the contract market has held up relatively well during that same stretch of time. We are hearing of a much tougher negotiating environment for truckers heading into the spring freight uptick. Headwinds to the recovery are building and 2016 is not likely to be as strong a year for truck operators. After 2016, however, the situation could begin to reverse as carriers implement ELDs and speed limiters ahead of the mandatory dates set for late 2017 and early 2018. Even if the economy sours between now and then, the impact of those regulations could be enough to keep capacity relatively tight and rates neutral.”

The potential pending capacity shortfall, due to the ELD mandate, has been a major topic of discussion in trucking circles.

Many trucking observers maintain that the need for ELDs is obvious, with most explaining that the industry has been reliant on paper logs for far too long. And there could likely be economic benefits through ELD usage, as observers say it could likely reduce the effective number of miles a driver could log, further tightening trucking capacity at a time of ongoing limited truck driver supply, rising pay, and higher overall fleet costs.

Stifel analyst John Larkin wrote in a research note that shippers are already asking carriers to begin installing ELD now, explaining that the impact associated with ELD implementation may be felt earlier than anticipated.