Hurricane impact takes toll on FTR’s Shippers Conditions Index

The most recent edition of the Shippers Conditions Index from freight transportation consultancy FTR showed significant downward momentum, driven in large part by the recent hurricanes.

FTR describes the SCI as an indicator that sums up all market influences that affect the transport environment for 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 fell to -6.7, a sharp decline from July’s -0.1 and June’s -0.7.

FTR said that the August SCI beared the brunt of short-term fuel cost increases caused by Hurricane Harvey disruptions. And it added that along with the fuel cost increase, the more negative SCI reading was also impacted by increased logistic costs for shippers that are expected to persist into 2018.

This has been playing out with spot prices having already spiked due to full capacity utilization, as well as pressure on contract pricing expected to increase by the end of 2017 and into 2018, keeping the SCI index in negative territory through the period. 

“Shippers are in a tough position right now,” said FTR COO Jonathan Starks in a statement. “We have known for some time that the trucking industry has been operating with very little excess capacity; however, the weak pricing environment masked that phenomenon for the last year. Hurricanes Harvey and Irma exposed shippers to this new reality. There just wasn’t enough excess capacity to deal with spikes, and the result was a significant spot market pricing gain that persisted through early October. Spot rates have begun to normalize, but that still puts rates at +20% compared to last year. When you couple the Hurricane impacts with increased freight demand and the fast approaching ELD implementation, there’s a real fear that loads won’t get delivered. This is already beginning to show up in the contract markets. Spot prices were the canary in the coal mine - contract pricing is likely to show significant gains through most of 2018.”