Shipping Costs Expected to Stay Elevated
Persistent Capacity Shortages Expected to Keep Cost to Ship Goods ‘Elevated’
Excerpt from Supply Chain Brain | By: FTR | December 01, 2014
FTR’s Shippers Conditions Index for September, at a reading of -6.6, is basically unchanged from the previous month reflecting continued capacity shortages that degrade service and push rates higher. With sustained capacity tightness and fleets now announcing pay increases, the cost to ship goods is expected to remain elevated. The typical slowdown in freight tonnage during the winter months will only offer a minor and short term reprieve with the Shippers Conditions Index (SCI) expected to remain in the current range for the foreseeable future.
“While truck capacity hasn’t been as bad as we saw during last winter, it has remained tight and, as a consequence, rates have been elevated throughout the year,” says Jonathan Starks, FTR’s director of transportation analysis. “Recently, concern has moved from capacity on the roads, to problems at the ports. We are seeing potential impacts to retailers’ Black Friday plans because of the port congestion. To add to the troubles, importers are getting hit with surcharges at the ports. They are dealing with delays in getting goods and additional costs on top of that. If a resolution of the West Coast labor dispute or a winter slowdown in freight doesn’t ease the situation, we could have a very tough operating environment in early 2015 for those that are dependent on those ports.
“Truck fleets are getting confident in their ability to secure rate increases for next year and have been busy ordering new trucks for delivery in 2015. October truck orders were for over 45,000 units – the second-highest total on record. However, we don’t believe that it will be enough to significantly alter the supply and demand balance. The market will soften as we head into the new year (weather permitting) but will tighten again as soon as spring appears. Shippers need to be prepared for another year of dealing with tight capacity and increasing rates – no matter the mode.”
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 that conditions for shippers are approaching critical levels, based on available capacity and expected rates.