FTR’s Shippers Conditions Index (SCI) conditions for November, at -6.0, continued to reflect a negative environment for shippers despite improving for the third straight month after hitting a low point in August. This index will continue to moderate mildly as regulatory pressures are temporarily reduced because of weak freight multipliers due to a shift in the economic mix from industry to service. However, FTR reports some evidence from the field of continued tightening capacity which presents some serious downside risks to shippers.
Eric Starks, President for FTR, comments, “We are currently seeing things tighten up in the market, and it is not yet reflected in the November numbers. I would expect to see the SCI index weaken further as we move through the first quarter. This is not a good sign for shippers. The biggest concern right now is a tightening in trucking capacity. In early December, we saw a spike in capacity utilization and it was exacerbated by the recent storms. It will be interesting to see if the tightness continues as we start to approach February. If it does, then we will likely see a surge in shipping rates for all of 2014, as shippers typically put out bids and lock-in contract rates in the first quarter for the balance of the year.”
The SCI 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.