Conditions worsened for shippers in the month of May as far as overall conditions go, but even so rate increases have been held at bay, as have fuel prices. So while things remain less-than-favorable, as measured by transportation forecasting firm FTR’s monthly Shippers Condition Index, the rest of 2015 could well end up being just barely tolerable as opposed to the downright crummy conditions we’ve seen in recent years.
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. The SCI in May came in at -3.1, which reflects the current manageable capacity utilization, which is expected to remain in place through 2015. Going into 2016, however, conditions are likely to deteriorate as the pressure from expected new regulations will put a significant drag on capacity.
“For most domestic shippers it looks like we are nearing the halfway point of reductions in total costs for over-the-road and rail shipping,” says Jonathan Starks, director of transportation analysis with FTR. “Total transit costs, on a year-over-year basis, have been negative since late in 2014 and are expected to turn positive in late 2015 or early 2016. This has given logistics professionals a small amount of breathing room after the crisis levels that were seen during parts of 2014.”
Unfortunately, Starks adds (and there always seems to be an “unfortunately”), shippers won’t be resting easy for long. “Although the industrial sector is disappointing, the economy is still growing and the regulatory environment is getting primed for action in 2016 and 2017. This will once again tighten capacity and force another upward shift in truck pricing that will likely filter through to all modes in some fashion.”
Translation: Expect higher rates as it gets tougher to find available trucks.
[Fresh air photo provided by Thinkstock]