FTR’s Trucking Conditions Index remains down but shows modest improvement

Even with an increase over May, the outlook for the trucking sector remains challenging, according to the most recent edition of the Trucking Conditions Index (TCI) from freight transportation consultancy 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.

June’s TCI came in at 2.92, which is ahead of May’s 1.69, which is the lowest TCI reading since 2011. April’s TCI was 6.2, and in March it was at 4.22 which marked an almost 50 percent decline compared to February.

The main factors for the ongoing depressed market environment, according to FTR, were slow freight and a lull in new regulations. But even with these challenges, FTR said that the TCI is expected to head up into 2017, when the “capacity constraining effects of new regulations are calculated in.

FTR COO Jonathan Starks said in a statement that June’s TCI indicates that trucking operators are doing OK but not great.

“Trucking rates, especially for the dry van segment, have moved notably lower over the last 9 to 12 months, but recent data indicates that both contract and spot rates may have hit bottom and could be moving back up,” he said. “This would be a strong catalyst as we begin to enter the final preparations of the ELD mandate set for late 2017.  We are hearing that many shippers, and fleets, are looking to implement technology well in advance of the due date in order to have time to mitigate any issues that arise from its deployment.  We are also seeing that the extra capacity that was in the system following the 2014 reversion of the HOS rules has been mostly eliminated, and that any change in HOS or in improving economics could quickly tighten up the market like we saw in 2014.”

Other factors impacting trucking include still fairly loose capacity, inconsistent demand, and rate pressures, among others.

And as Contributing Editor John D. Schulz observes in LM’s August Quarterly Trucking Transportation Market Update, excessive inventory and a less-than-robust over all economy are causing excess capacity, which is resulting in some carriers straining to keep their trucks somewhat full by aggressively cutting rates.

Other things impacting the industry include the ongoing regulatory crunch and a lack of the typical uptick seen in Q2 and Q3, which has led to some shippers looking for rate relief from carriers.

Stifel analyst John Larking observed in a recent research note that things like a strong dollar, low energy prices, mediocre consumer spending and weak capital investment are all weighing on freight markets.

On the truckload side, he stated that spot market pricing has weakened and the contract pricing environment has become more competitive, while lower fuel surcharges are still a positive for shippers and generally negative for carriers. And on the LTL side, he said that spot market pricing remains soft, with contract pricing modestly up annually, with lower fuel surcharges being a negative.