Trucking conditions see slight moderation, according to FTR data

While overall market conditions are not dire, there is a confluence of factors working together that need to be monitored in the trucking sector, according to the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.

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While overall market conditions are not dire, there is a confluence of factors working together that need to be monitored in the trucking sector, according to the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR.

These factors include modest recovery growth, coupled with a lack of acceleration in contract rate increases and increased labor and recruiting overhead costs, the firm said.

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 May, the most recent month for which data is available, the TCI fell from April’s 5.91 to 5.74. FTR said in the report that a near capacity crisis environment through May is expected to have eased somewhat in June and while still in solidly positive territory, the TCI outlook has moderated. 

“While still robustly positive, the TCI has moderated recently and reflects some of the challenges currently facing the industry,” said FTR Director of Transportation Analysis Jonathan Starks. “Capacity is tight but has moderated from the critical level that we operated in during and just after the winter months. Freight rates seem to be a tale of two cities with contract rates very stable and only showing modest growth, yet spot rate activity has been quite strong since winter hit and has not let off since then. If economic growth continues to remain modest then we would expect the status quo to persist for some time; however, if the economy finally shows a strong growth spurt in 2014 there isn’t sufficient surge capacity in the truck market to be able to easily accommodate that growth. When combined with the inability to quickly add more drivers into the industry we would then expect rate growth to accelerate in both the spot and contract markets.”

Starks’ points have rang true in all corners of the freight transportation market, especially since winter finally came to an end. Should GDP growth materially increase, industry experts maintain it will become far more difficult for shippers to secure capacity than it already is and could also see them turning more to intermodal in an effort to be less truck-dependent until things improve on the capacity side.

For those shippers that do not view intermodal as an option, they are likely to see further gains in pricing made by carriers they work with.

“Price increases in exchange for capacity commitments from well capitalized, well systematized large fleets should become more widely available as supply/demand tightness further intensifies,” wrote Stifel Nicolaus analyst John Larkin in a research note. 


About the Author

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. Contact Jeff Berman

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Article Topics

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