BLOOMINGTON, Ind. — FTR’s Shippers Conditions Index (SCI) took a significant hit in August, dropping to a -6.7 reading, primarily because of short-term fuel cost increases caused by Hurricane Harvey disruptions.
In addition to the fuel cost increase, the more negative SCI reading was also impacted by increased logistic costs for shippers that are expected to persist into 2018.
Spot prices have already spiked because of full capacity utilization.
Pressure on contract pricing is expected to increase by the end of 2017 and into 2018, keeping the SCI index in negative territory through the period, according to Jonathan Starks, chief operating officer.
The October issue of FTR’s Shippers Update, published October 10, details the factors affecting the August Shippers Conditions Index, along with discussion about the effects of recent hurricane activity on the market.
“Shippers are in a tough position right now. We have known for some time that the trucking industry has been operating with very little excess capacity; however, the weak pricing environment masked that phenomenon for the last year,” Starks said. “Hurricanes Harvey and Irma exposed shippers to this new reality. There just wasn’t enough excess capacity to deal with spikes, and the result was a significant spot market pricing gain that persisted through early October.
Spot rates have begun to normalize, but that still puts rates at +20 percent compared to last year. When you couple the hurricane impacts with increased freight demand and the fast approaching ELD implementation, there’s a real fear that loads won’t get delivered. This is already beginning to show up in the contract markets. Spot prices were the canary in the coal mine; contract pricing is likely to show significant gains through most of 2018.”
The Shippers Conditions Index tracks the changes representing four major conditions in the U.S. full-load freight market.
These conditions include freight demand, freight rates, fleet capacity and fuel price.
The individual metrics are combined into a single index that tracks the market conditions that influence the shippers’ freight transport environment.
A positive score represents good, optimistic conditions. A negative score represents bad, pessimistic conditions.
The index tells 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.
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