Driver shortage starts to impact pricing

FTR’s Shippers Conditions Index (SCI) has dropped for July, reflecting tighter truck capacity and a strong upward movement in contract pricing, the firm said. According to FTR, the contract markets are starting to show their first “significant reaction to the driver shortage,” which is increasing impacting truck fleet capacity. Spot rates remain high as well.

The July SCI fell 1.3 points from June to a reading of -7.8. Any reading below zero indicates a less-than-ideal environment for shippers. Readings below 10 signal that conditions for shippers are approaching critical levels, based on available capacity and expected rates.

Also, FTR said that, partly in response to the tightening capacity and the expectations of rising prices, trailer orders in August jumped 27% from July and 45% from a year ago. Net orders for August came in at 23,135 units.

August order activity is for production in 2015, FTR said, in reaction to increasing capacity constraints and long lead times at trailer manufacturers, with some fleets placing orders early to beat expected price increases as well. 

Increasing labor and purchased transportation costs are rising, FTR said, which should result in the SCI remaining in its current range for the foreseeable future.

“The challenges in the industry continue as we head into the fall shipping season. FTR just concluded its annual transportation conference, and our numerous interactions with shippers, truck fleets, and railroads only enhanced our conviction that the freight transportation markets remain strained,” said Jonathan Starks, director of transportation analysis. “The silver lining is that the industry will be able to handle most of these challenges with only limited capacity shortages. The downside is that truck rates are continuing to move higher and are unlikely to stop that momentum this year.  Also, even though outright shortages will be limited, it will take even more work, and possibly delays, to get your non-optimized loads moved. For the railroads, service issues and slow speeds are likely to continue until the winter - when volumes slow and the railroads will finally be able to add in some additional crews.”

Turning back to the trailer orders, FTR said orders were particularly strong in refrigerated van, dry tank and dump trailer segments.

“August trailer order activity is a very positive development and reflects strong market momentum approaching the fall ordering season. FTR sees no signs of the trailer market slowing down, so we expect good order numbers for the next few months.  All trailer segments are seeing good order activity,” said Don Ake, vice president of commercial vehicles.

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