Upper hand remains intact for carriers, according to FTR’s Trucking Conditions Index

Freight transportation forecasting firm FTR reported this week that based on the most recent reading of its Truckload Conditions Index (TCI), trucking market conditions continue to reflect the ongoing theme of tight capacity.

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 August, the most recent month for which data is available, the TCI was 9.10. With what FTR described as “market tightness” intact, it explained that rate and service spreads are increasing between good and bad freight, meaning that carriers are experiencing demand levels for their services that are allowing them to choose between good and bad freight while maintaining dependable workloads and increasing margins.

And the firm added that the index should stay at positive levels in the coming months, due to an improving economy, which could result in strong potential for freight.

“With overall capacity remaining tight and continued cost pressures at fleets we can expect to see freight rates moving higher into 2015,” said FTR Director of Transportation Analysis Jonathan Starks in a statement. “Spot rates are edging lower—from a very high level—but contract rates are still showing signs of acceleration. Growth in the use of outsourced capacity (i.e. broker and spot markets) is joining wage increases as a main driver of cost increases. Fleets are using more outsourced capacity, a segment in which regulatory impacts are especially strong.”

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.