FTR’s Shippers Conditions Index (SCI) for December 2014 improved markedly to a near neutral reading of -0.6, reflecting the rapid drop in diesel prices along with positive capacity impacts from reversal of some of the Hours of Service rules.
FTR expects the conditions for shippers to deteriorate in 2015, under the pressure of building regulatory drag and good freight growth straining capacity. Continued low fuel costs could mitigate the level of decline in the SCI.
Jonathan Starks, FTR’s Director of Transportation Analysis, said, “For those who are focused on the bottom line, the recent news has been very favorable. For those looking down the road, there are still plenty of obstacles to prepare for. With fuel costs dropping rapidly in December and on into January, those financial tailwinds benefitted both carriers and shippers. As diesel prices continue to stabilize, as they have over the last few weeks, those tailwinds will quickly abate.
“After seeing total transport costs rise 2-3% throughout 2014, it is expected that costs will actually be below year ago levels during the first quarter of 2015, with that trend continuing for most of the year. The flipside is that fleets are still pushing for strong base rate increases as their costs outside of fuel continue to be higher. Successful shippers will be focused on total landed cost, base rate increases, and securing capacity. Focusing on just one will leave you exposed to either higher than necessary costs due to high rates in a softening economy, or a lack of capacity in an expanding marketplace. In addition, shippers need to be aware of an unusually high level of uncertainty surrounding the energy market—a market already prone to extreme volatility.”