The most recent edition of the Trucking Conditions Index from freight transportation forecasting firm FTR continue to echo the ongoing theme that current market conditions continue to support 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 October, the most recent month for which data is available, the TCI was 8.53, which represents a slight decline from September’s 9.07, which FTR said still reflects strong industry fundamentals for carriers. And even though capacity utilization is not as tight as it was earlier in the year, tight conditions are expected to persist, while easing modestly, into 2015 in conjunction with ongoing growth in freight volumes, higher rates, and low fuel costs.
“Market fundamentals remain strong for carriers as we approach the end of 2014,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “Our expectations for the TCI are for it to maintain its current high level throughout 2015, as we continue to see a very positive market for fleets and drivers for at least the next year. Capacity is still tight, but not nearly as severe as early in 2014. FTR data indicates a drop of nearly 1.5 percentage points in truck utilization since the high of 99 percent achieved last winter.”
Starks added that The Market Demand Index from Internet Truckstop confirms FTR’s position––after averaging nearly 25 during the first half of 2014, it is currently below 20. And he noted that contract rates continue to edge higher, and spot rates are still well above prior year levels, even accelerating some in the last few weeks.
“Internet Truckstop data shows rates up nearly 20% at the end of November,” he added. “Spot rates will come across tougher year-ago comparisons starting in December but are expected to remain elevated during 2015. Fleets are feeling more bullish about 2015, and it is showing up in ordering activity for new trucks. Class 8 new truck orders hit their second highest level ever in October and fell only modestly in November. While we don’t expect much in the way of additional capacity coming into the system, the carriers are certainly trying to entice drivers, reduce maintenance costs, and enhance fuel economy.”
As previously reported, industry stakeholders on the carrier side have indicated that purchased transportation is becoming more prevalent for shippers looking to secure capacity when and where needed in a crowded marketplace.
This approach has seen shippers looking to have a plan for dedicated contract carriage, especially for those that do not have the required resources for private fleets, which are gaining traction in terms of where carriers, especially larger ones, are growing.
What’s more, in addition with carriers able to choose between good and bad freight, carriers in recent months are more effectively able to push through needed rate increases, due to things like regulatory drag from HOS and CSA, tight capacity, and the need for a decent return on invested capital in order to properly invest in their fleets for future growth and asset-related expenditures, too.