Market conditions for shippers remain difficult, says FTR

Three months of mediocre growth regarding the market environment for shippers came to a halt in December, based on 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.”

And the December SCI, which represents data for the most recent month available, was -6.9, down from -6.0 in November and still in negative territory. The most recent low point for the SCI is last August’s -8.7.

As has been widely reported by LM, difficult winter weather conditions continue to be an issue for shippers, when it comes to managing capacity and growth.

“After seeing decent economic growth to end 2013, 2014 has started off by taking a few blows,” Jonathan Starks, FTR’s Director of Transportation Analysis said in a statement. “First came the severe winter weather that put a significant cramp on both transport capacity and on production days for much of the U.S. This is likely to be a short-term impact as we get past the worst of the weather woes, but it does highlight the fact that there is very little excess capacity in the truck markets. We will know very shortly when the spring shipping season starts if it will be a bigger than expected issue. With only modest economic and freight growth expected to occur during most of the year, our best estimate is that we will be able to skirt any significant issues. However, if the economy (especially manufacturing) shows any sort of hot spell during the year, there is a real likelihood that capacity will be insufficient for many shippers and competition for truckers (aka pricing) will rise rapidly.”

Starks’ points have been resonating in the freight transportation market, with many brokers pointing to how shippers’ supply chains are several days, if not weeks, behind, due to the myriad storms in recent weeks and months.

This has led to shippers looking for more loads than usual at this time of year, with February traditionally viewed as slower than most months.

And the current situation, according to Avondale Partners analyst Donald Broughton, has led to a market far more favoring carriers than shippers.

“Our takeaway from recent trucking data points is that whatever the mixture of shrinking supply, bad weather, and solid demand, the sharp acceleration in the spot market in recent weeks and months shows how quickly the truckload marketplace has moved in favor of the carriers,” Broughton wrote in a research note. “We have recently raised our projections for TL pricing to greater than +3% for 2014 and would note that current spot market data suggests that rate increases of up to +5% could be possible if current trends persist.”