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Tight capacity remains intact for now and likely into the future, reports FTR

By Jeff Berman, Group News Editor
May 21, 2014

Tight capacity in the freight transportation market continues to be the norm, and that theme was no exception in the most recent edition of the Shippers Condition Index (SCI) from 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.” Readings less than 10 indicate that shipper conditions are nearing critical levels based on available capacity and expected rates.

The March SCI was basically flat at -8.7 and represents the most recent available data. FTR said this level is indicative of extremely tight capacity to haul goods, and expects the tight capacity environment for shippers to moderate slightly in the coming months or at least until there is a surge in freight demand due to improvements in the economy. And it added that with any type of economic gains in freight tonnage, capacity could reach what FTR called a “critical stage” that could see shippers adding to their purchased transportation costs.

“Shippers learned that it doesn’t take much for a market that is operating with slim excess capacity to jump into the driver’s seat for rate increases,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “The strong spot market rate increases seen during January, February, and March highlighted how quickly the environment can change on them. Just one year ago, several industry sources were showing that general rate increases were actually below year-ago levels; shippers were getting rate reductions! A fairly static economy allowed that to take place, but the introduction of new Hours-of-Service (HOS) rules for drivers back in July 2013 changed that. Add in the potential for further economic acceleration in 2014 and we find it very unlikely that shippers will be able to get the rate reductions that they achieved last year.”

Starks added that FTR is expecting to see general rate increases between 4-5 percent in 2014 for truckload and national rate figures coming in at 6 percent or higher annually by mid-year.

The lack of ability for shippers to get rate reductions due to tight capacity is unlikely to change in the foreseeable future, industry stakeholders say.

Tom Nightingale, president, transportation logistics, for Genco, a Pittsburgh-based 3PL, said in a recent interview that his company has seen supply and demand for capacity come down from the near-crisis levels of January and February, noting that the market still remains tighter than it has been in years.

“There are pockets of the country that are exceptionally tight, but as a whole the industry seems to have worked through some of the backlog created during those months and has found a new, tighter, norm than we have seen in a long time,” he explained.  “Our team is getting our customer’s freight covered, but it’s taking a lot more work and deeper carrier bench-strength than it was at this time last year.”

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


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Article Topics

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