FTR’s Shippers Conditions Index (SCI) for November continued in near-neutral territory at -0.6, reflecting mild market conditions. The index will head into a moderately negative range later in 2016 as expectations for a tight capacity environment in 2017 begin to take hold.
Shipping costs are currently being positively impacted by lower fuel costs that are offsetting any increases in transport costs. FTR does not expect much to change until the second half of 2016, but the SCI will drop as the forward-looking capacity crunch negatively affects it.
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 conditions for shippers are approaching critical levels, based on available capacity and expected costs.
Jonathan Starks, chief operating officer at FTR, said, “The tough conditions that shippers had been operating in since the end of the recession have been muted over the last year. Over the last 12 months, the SCI has averaged a reading of just -1, a sharp contrast to the -6 that it averaged for the three years prior.
“These more benign conditions have come about because of two key factors: fuel prices have yet to find a bottom, and truck and rail capacity is ample enough to handle any surges in freight. With oil prices continuing to fall to decade lows to start 2016, it looks like we could even see some positive readings during the first quarter of the year.
“The stable environment will come to an end, but it is unlikely to change significantly until late 2016 at the earliest. The more likely outcome is that the market will remain relatively neutral during 2016 and most of 2017 before shifting negatively for shippers in the latter part of 2017 as several key regulations start having an impact on the market,” Starks said. “Forward-looking shippers will be keeping a close eye on those dates as they take advantage of the current environment to nail down capacity and lock in rates.”