Freight capacity crunch easing

Jan. 26, 2015

The latest Shippers Conditions Index (SCI) from FTR indicates that the capacity crunch the industry has been feeling is easing, although the firm warns that the longer-term outlook remains negative for shippers.

The SCI for November 2014 came in at a reading of -3.2, reflecting an easing of capacity tightness and lower fuel prices.

FTR said rising rates, though, will continue to impact shippers throughout this year. The SCI will likely hit positive territory when early 2015 data is compiled before moving lower and then remaining in negative territory indefinitely, barring a recession.

“While capacity pressure modestly eased from the extremes that persisted during the first half of 2014, it still remains a tight market by historical standards. The biggest impact on the SCI recently has been the dramatic drop in fuel prices. This is a positive for shippers, as long as it continues to move lower,” said Jonathan Starks, director of transportation analysis. “Once prices bottom out and move back up, the overall costs for shippers will move up correspondingly. The fuel decline is good for total spending, but the base rates being charged by carriers continue to move higher. Driver wages are moving up (approaching double-digit gains) in response to the tight capacity situation and the driver shortage.”

The Shippers Conditions Index is a compilation of factors affecting the shippers transport environment. 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. Details of the factors affecting the Shippers Conditions Index along with additional commentary exploring how long the current economic recovery is expected to last are found in the January issue of FTR’s Shippers Update published January 8, 2015. 

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