FTR’s Trucking Conditions Index shows continued signs of improvement in trucking sector
May 10, 2013 - LM Editorial
Freight transportation consultancy FTR Associates reported today that there are signs of improvement in the trucking market, which continues to show gradual signs of improvement.
In its Trucking Conditions Index (TCI) report, FTR said its reading for March was 13.12. 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. March marks the third straight month that the TCI has been above ten, with February coming in at 12.9 and January at 10.6.
“With enforcement of the revised Hours of Service regulations now less than 60 days away, shippers and carriers need to be preparing for the change,” said Larry Gross, FTR senior consultant, in a statement. “Although there is still a chance that the court will issue an injunction, this becomes less likely with each passing day. FTR estimates an overall productivity reduction of about 3 percent from the changes in Hours of Service, but this will vary widely depending on the characteristics of each carrier and shipper. Removal of 3 percent of trucking capacity should be enough to start rates on a solid upward trajectory. If regulators continue to roll out the additional regulatory changes already in the pipeline and freight continues to grow at even a moderate pace, tight conditions could continue for several years.”
FTR officials added that the TCI includes what it describes as a forward-looking component, which is pushing the TCI level up. And they said that continued moderate growth in conjunction with HOS and other regulations, will cause trucking rates to firm up in the coming months and improve carrier profitability.
Similar thoughts have been echoed throughout the industry in recent months. At last month’s National Shippers Strategic Council (NASSTRAC) Annual Conference, various carriers cited capacity cuts of 3 percent or more due to HOS, coupled with the vast majority of carriers noting they have no plans to increase assets or related equipment, other than on a replacement basis.
FTR’s Gross recently told LM that even with mild economic growth, overall conditions are likely to be tempered for shippers, adding that if the recent spate of good economic news translates into more robust economic growth, capacity would tighten significantly and greater upward pressure on freight rates will come as a result.
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