Aided by the rapid decline in fuel prices, the most recent edition of the Trucking Conditions Index (TCI) from freight transportation forecasting firm FTR continued to point to favorable market conditions for motor 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 November, the most recent month for which data is available, the TCI was 8.98, which was up slightly from October’s 8.53 and down from September’s 9.07. FTR said that the TCI also benefitted from decent volumes resultant from Christmas shopping season, with the TCI expected to remain in what it considers a normal range for a tight trucking market in 2015, with TCI readings residing in the 8-9 point range. And the firm added that it expects trucking capacity, which was especially tight to varying degrees in 2015, to see an increase, with the suspension of the Hours-of-Service 34-hour restart provision in effect through September 2015.
Along with the ongoing decline in diesel gasoline prices, which currently reside at their lowest level since November 2010, motor carriers are expected to see gains from steady volume growth and pricing power, too.
“With a new year comes new issues to deal with, but the old ones haven’t gone away. Or have they?” FTR’s Director of Transportation Analysis said in a statement. “Diesel fuel prices have dropped nearly 20 percent over the last year, and nearly all of that drop has occurred over the last six months. After a year that started with severe weather, which kept truck capacity limited until summer, December brought welcome relief as the congressional budget bill removed one of the restrictions keeping driver productivity down. Finally, an economic recovery that couldn’t seem to gain any traction rebounded in the second quarter and then accelerated in the third quarter, hitting 5 percent in Q3 - a level not achieved since 2003, and the strongest 2 quarters of growth this recovery.
Starks added that the drop in diesel prices is a dramatic change in the operating environment for carriers after a four-year span in which fuel prices were nearly stagnant, explaining that the diesel decline is the single biggest contributor to November’s improvement in the TCI and is expected to continue to push the TCI higher when the December results are in.
The FTR executive also said that carriers will likely deal with some margin pressure when fuel costs do rise, but it remains to be seen if the drop in fuel costs will benefit rate negotiations early on this year.
“The overall trucking market is really strong and did not take much of a dip in November and December,” said Joel Clum, president of Chicago-based freight transportation and logistics consultancy CarrierDirect. “A few carriers maybe saw some decreases, but it had more to do with business-related strategies than the over all market. In the truckload industry, specifically, things continued to be really hot. We were getting reports from carriers and truckload brokerages that indicated they were working through the holidays, because things did not really slow down for them, whereas often near the end of the year many carriers are running skeleton crews or half or three-quarters speed of where they would generally be, because of demand for their services. This has a lot to do with the continued growth we have seen in the economy. Truckload has not really slowed down, and it does not seem like it is going to at the moment.”