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Shipping Conditions Fall Back into a Hole

May 4, 2015
After a brief moment of industry optimism, condiitons for shippers slipped back into the negative hole they've been in for most of the past four years.

Well, that didn’t last long. The euphoria over the Shippers Conditions Index (SCI) finally breaking out of negative into positive territory lasted all of one month. After languishing under zero for more than four years, the SCI finally surged into the plus side in January 2015, registering a score of 2.6. However, in February the SCI dipped back down to -1.0.

The SCI is a measurement tool created by transportation analyst firm FTR that compiles various factors affecting the shippers transport environment into a metric score. Any reading below zero indicates a less-than-ideal environment for shippers, and unfortunately that one month of good news seems to have been an anomaly.

As FTR’s report points out, the short-term positive impact from dropping diesel prices and the reversal of the 2013 Hours-of-Service regulations has already run its course. FTR expects to see shipping conditions deteriorate “under pressures building from new regulations hitting the trucking sector along with continued freight growth and expected upward movement in energy prices.”

“February was a tough month to get a good reading on the state of the economy,” notes Jonathan Starks, FTR’s director of transportation analysis. “From bad weather to port stoppages to weak economic data, it came as no surprise that the SCI remained close to a neutral reading for February. For shippers, spot market capacity has certainly eased from the very tight market in 2014, with showing a 15% increase in available trucks in February versus last year. However, FTR estimates that the contract side of the business remains well above 95% utilization. While down from the extreme levels of last year, it is still strong enough to force shippers and carriers to deal with the coming regulatory tsunami.”

And don’t get too comfortable about the steep declines in fuel costs in recent months. Starting in March, Starks points out, shippers once again found themselves in parity with what truckers are paying and charging for fuel. “Conditions for shippers will likely stay modestly negative for the balance of 2015,” Starks predicts, which would be an improvement over the last couple of years. “The big change to the operating environment comes in 2016 when numerous regulations in the pipeline start being implemented. If (and that’s a big if) the economy can keep growing in 2016 and 2017, the capacity problems of early 2014 will look small in comparison.”

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