By Jeff Berman, Group News Editor
08 September 2014 – LM Editorial
Market conditions continue to favor trucking carriers, largely due to tight capacity, according to the latest edition of the Trucking Conditions Index (TCI) from freight forecasting firm FTR.
The TCI reflects the conditions of tight transport capacity and includes various measures, 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 volumes, pricing and margin are in good range for carriers.
July’s TCI, the most recent month for which data is available, is 8.49, which FTR says is one of its highest points of 2014 and reflects price increases and disruptions. due to continued tight capacity in the truckload business. And the company noted that current levels of truck utilization are within 100 basis points of record highs, which it says translates to further economic growth and associated freight likely to strain capacity and subsequently increase fares.
“When you look at the truckload market, for much of 2014 it was a matter of two markets with very strong spot activity, particularly in terms of pricing,” said the chief analytics officer. of FTR Transportation, Jonathan Starks, in a statement. “The contract market has been less robust but still shows signs of strain on capacity, costs and tariffs. You can expect to see these two markets merge this fall as a shipper’s major carriers become even more stressed and contract rates rise. Public announcements of large driver salary increases by fleets bear witness to this. Despite an easing over the summer, spot rates are still high compared to last year. Keep an eye on the spot rate as we head into September as it will be an early indicator of capacity shortages and strains in the system. »
Robert W. Baird & Co. analyst Ben Hartford agreed with FTRE, noting in a research note that spot load activity remains healthy due to the continued tightness of cargo capacity. trucks.
“Regulatory changes in the trucking industry and additional challenges in recruiting drivers continue to limit available truck capacity,” he wrote. “Spot Truck Activity Remains Above Seasonality in 3Q14; and we believe industry rate growth needs to accelerate in 2H14 and 2015 to offset the additional inflationary cost pressures experienced in 2014.”
Hartford added that he expects rate increases for committed capacity in the second half of the year to exceed the first half rate, explaining that stories about shippers’ willingness to secure capacity during seasonal weakness in July/August likely signals both anticipation of the expected capacity crunch in the fourth quarter of this year and the likelihood of a continued acceleration in fare growth in 2015.