FTR’s Trucking Conditions Index remains in solid territory for carriers

The most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR continued to reflect how current market conditions are translating into solid overall momentum for motor carriers.

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 7.8, which is a solid number even though it was off 34 percent compared to December’s 8.53.

FTR said that the current TCI represents the ongoing net positive effects of lower fuel prices that it said are being offset by weaker inputs from freight rates, load growth and capacity. And the firm added that it expects the TCI to stay at a relatively high level and move up from that later in the year, with the industry expected to deal with ongoing “regulatory drag,” as the TCI tends to be influenced by capacity utilization and changes in prices.

“Despite the drop in the TCI from December to January, the index remains at a high level and is only slightly below the average score for 2014,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “A drop was expected since the December TCI spike was caused by the rapid drop in diesel prices. Diesel prices have now bottomed in early February and are beginning to rise slowly, adding 11 cents at the start of March. Diesel’s impact on the TCI will slowly subside in 2015 but stay positive, unless the volatile energy markets jump higher. The Market Demand Index (MDI) from truckstop.com highlights that the capacity situation is much looser than last year but looks to have bottomed recently and has tightened the last three weeks, hitting 16.21 the first week of March. While this is down nearly 40 percent from the polar vortex-affected 2014 it has jumped nearly 60 percent from its low in mid-February. I expect capacity to be more available during the spring shipping season since weather has been less disruptive and the HOS rollback has begun being implemented.”

The fact that capacity may be tightening is not entirely surprising, given that in much of 2014 the truckload market was viewed as being the tightest it has been in a decade, explained Robert W. Baird & Co. analyst Ben Hartford at the SMC3 Jump Start conference in Atlanta earlier this year.

Reasons for that tightness include the July 2013 changes to the Hours-of-Service rules, although the highly-contested changes to the 34-hour restart rule have been suspended through the end of September, the aforementioned harsh winter weather a year ago, and the ongoing driver shortage, among other factors.