While research firm FTR Associates has reported its Shippers Condition Index (SCI) ended up hovering near the neutral reading of zero at the end of 2010, the “leverage” within the freight market is now starting to turn in favor of motor carriers – meaning shippers should now start focusing on locking in long-term capacity contracts, according to Eric Starks, FTR president.
“What’s happening is that we’re back in a more ‘normalized’ freight environment than what we’ve seen over the last year to year and a half,” Starks told Fleet Owner. “Capacity and freight demand are now balanced, but things are now starting to tip in favor of truckers. They’ll have the upper hand as the year progresses.”
He noted that FTR’s SCI sums up all market influences that affect shippers, with a reading above zero suggesting a favorable shipping environment, while a reading below zero is unfavorable.
FTR projects that the SCI will soon significantly worsen due to tightening carrier capacity as the economy re-accelerates and new regulations – such as the Federal Motor Carrier Safety Administration’s CSA safety rulers – begin to have an impact.
FTR further projects the next surge in truckload freight rates should occur during the second quarter of this year as seasonal freight demand begins to increase. LTL rates, while increasing through 2011 and 2012, will lag behind TL rates because of more favorable driver hiring conditions. Improving freight growth will also increase freight rates for both rail and intermodal segments as well through 2011 and 2012, Starks added.
This unfavorable outlook for shippers means that many should begin looking to lock in long-term capacity, he stressed. “Many are still holding off from doing that, because they see the market is balanced and believe they can maintain leverage,” Starks pointed out. “We think, from the data we are seeing, that leverage will instead shift back to trucking very soon.”