FTR: Tight Trucking Conditions Reflects 95%+ Equipment Capacity Utilization

Date: February 15, 2018

Modern Materials Handling

The impact of very tight trucking capacity was evident in the most recent edition of the Trucking Conditions Index, according to the most recent edition of the Trucking Conditions Index (TCI), which was issued this week by freight transportation consultancy FTR.

According to FTR, a TCI reading above zero represents an adequate trucking environment, with readings above 10 indicating that volumes, prices and margin are in a good range for carriers.

For December, the most recent month for which data is available, the TCI was 9.2, which was well ahead of November’s 5.48 and in line with October’s 9.48.

FTR said that December’s reading reflects a full capacity environment that is paced by ongoing strength in freight demand. Looking ahead, FTR said it expects the TCI to remain elevated and head higher in 2018, with trucking capacity “maxed out” and freight rates at their highest level in a number of years.

“Fleets have been running very efficiently the past few years, with capacity utilization in the high 90% range. Couple this efficiency with increases in freight volumes and productivity hits due to weather and regulations, and it’s no surprise to the industry that the end of 2017 and the beginning of 2018 have been good for carriers,” said FTR COO Jonathan Starks in a statement. “We are seeing robust orders for trucks and trailers, serious recruitment drives, and the type of rate increases which make these expenditures feasible. In terms of the overall economy and freight demand, we are looking at strong potential for further upside possibilities for carriers.”

The TCI's takeaways regarding rates are in in line with observations from Robert W. Baird & Co. analyst Ben Hartford.

Speaking at last month’s SMC3 Jump Start 2018 conference in Atlanta, Hartford said that expectations for carrier rate increases during 2018 were high, consistent with recent spot truck pricing data, adding that Baird continues to see gains of 5% and higher for contractual truckload pricing growth in 2018, with LTL and domestic intermodal trailing but also remaining on growth paths.

What’s more, Hartford referred to an SMC3 audience poll of roughly 90 attended at the event, which cited how "65% of respondents selected "carriers are looking for payback," while only 35% selected "carriers will approach rate negotiations on a rational basis."

A separate question posited "given the strength in spot demand and pricing, when do (you) expect some relief?", and two thirds of respondents indicated 2019 or later (with 41% indicating during 2019 and 25% indicating 2020 or later). 29% expect relief in 2H18, with only 5% expecting relief during 1H18. 

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