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Shippers Are in the Eye of a Regulatory Storm

July 6, 2015
Shipping conditions look better, but only because shippers are in the eye of a regulatory and capacity storm that will grow worse as the year progresses.

So far, 2015 is shaping up as the year of the roller-coaster ride, as far as shippers conditions are concerned. Based on the volatile movement of transportation forecasting firm FTR’s Shippers Conditions Index (SCI), a compilation of factors affecting the shippers transport environment, it’s hard to know whether this will be one of the best years shippers have seen in a long time, or yet another year of disappointment and tight capacity.

Case in point: The SCI for April 2015 improved significantly to a reading of -0.7 after a sharp decline in the previous month. Any SCI 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. So the reading of -0.7 reverses the severe drop from the previous month’s reading of -4.8, moving back in the right direction toward at least a break-even point.

However, before you get too excited about improved conditions, FTR points out that the rise in the index for April was impacted by the temporary cessation of regulatory drag and drops in fuel pricing, and is likely to be short lived. These positive conditions for shippers are expected to evaporate as a result of an expected rise in diesel prices and the building of regulatory drag over the next couple of years on market capacity.

“Shippers are in what might be considered ‘the eye of the storm’ right now,” points out Larry Gross, senior consultant with FTR. “After a very tight situation last year, conditions have eased as economic growth has slowed, while truck capacity is relatively abundant following the Congressional roll-back of the 34-hour reset regulation. Additionally, fuel prices are down. We see little probability of any big near-term increase in demand, but capacity will inevitably begin to tighten once again next year, even at current demand levels, as the implementation date of more new safety regulations including the ELD [electronic logging devices] mandate draws nearer.”

Hurricane photo provided by Getty Images.