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FTR: Freight rates, tight capacity yield little optimism for shippers going forward

FTR: Freight rates, tight capacity yield little optimism for shippers going forward


Thursday, March 29, 2018

by THE TRUCKER STAFF


Full ELD compliance and a continuing driver shortage offer no real optimism for shippers, according to an FTR official. (The Trucker file photo)
Full ELD compliance and a continuing driver shortage offer no real optimism for shippers, according to an FTR official. (The Trucker file photo)

BLOOMINGTON, Ind. — FTR is forecasting a tough year for shippers on capacity and rates, and their January Shippers Conditions Index (SCI) at -11.1 reflects the challenges they are facing entering into the new year.

Rate growth year-over-year is expected to accelerate in the second quarter before easing slightly in the second half of 2018.

Full ELD compliance and a continuing driver shortage offer no real optimism for shippers, according to Jonathan Starks, FTR’s chief operating office, who said shippers will need to address freight transportation productivity, and their role in improving it, to counter the inevitable rising transportation costs associated with the current environment.

“The relationship between carriers and shippers tends to swing on a pendulum, and with freight demand high and capacity tight, carriers are benefiting,” Starks said.  “Numerous companies are announcing that domestic freight costs are at record levels. Since carriers currently hold such a strong position, shippers need to be hyper-focused on their relationships with carriers.”

“We are beginning to see the implementation, by both shippers and carriers, of the productivity enhancements that we have been expecting to happen,” said Avery Vise, vice president of trucking research.

“The elevated rate environment is not expected to be a short-lived event and continued progress will be necessary. There seems to be no single solution, and we are seeing many different routes to addressing the tight capacity environment, from changing driver requirements to increased driving school enrollment to increasing detention payments.”

Todd Tranausky, senior research analyst at FTR, said shippers should be flocking to rail carload and intermodal solutions, given the tight trucking market.

“But so far, the data has not shown that to be true. Intermodal volumes are growing but are limited by constraints of equipment and service levels,” he said. “Carload volumes, however, are still below 2017 levels through the first 11 weeks of the year. This unwillingness to convert traffic only exacerbates the truck capacity situation.”

The Shippers Conditions Index tracks the changes representing four major conditions in the U.S. full-load freight market. These conditions are: freight demand, freight rates, fleet capacity, and fuel price. The individual metrics are combined into a single index that tracks the market conditions influencing shippers’ freight transport environment. A positive score represents good, optimistic conditions. A negative score represents bad, pessimistic conditions. The index shows the industry’s health at a glance. In life, running a fever is an indication of a health problem. It may not tell you exactly what’s wrong, but it alerts you to look deeper. Similarly, a reading well below zero on the FTR Trucking Conditions Index warns you of a problem, and readings high above zero spell opportunity. Readings near zero are consistent with a neutral operating environment. Double digit readings (both up or down) are warning signs for significant operating changes.

 For more information about the work of FTR, visit www.FTRintel.com, follow us on Twitter @ftrintel, or call (888) 988-1699, ext. 1.

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