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Saturday, July 20, 2024

Under-utilized capacity part of the problem

Conditions for truckers continue to deteriorate, according to FTR, which reported that its May Trucking Conditions Index (TCI) has fallen to its lowest level since 2011. May’s 1.69 reading is nearly five points lower than April’s reading and capacity utilization has dropped below 95%.

Lower freight rates are also impacting carriers, as is continued uncertainty over hours of service.

Trucking companies could benefit from a reinstatement of the hours-of-service 34-hour restart conditions that have been batted around in the halls of Congress this summer,” FTR said. “If a version of the regulation does go into effect it would likely tighten capacity enough to move pricing.”

“One of the struggles right now is to bridge the gap between what the economic data is telling us and what the anecdotal evidence from carriers is telling us,” reported Jonathan Starks, COO. “Part of it has to do with simply how the industry participants feel relative to 2014 and 2015. The market was way up in 2014. Conditions were ideal for spot market players – regulations tightened capacity and weather exacerbated it. Add in some relatively strong economic growth and carriers were feeling extremely good. Now? Capacity has loosened. Spot rates are down, so revenues are down. And recently the contract market has taken a cue from the looser capacity, and weakness has been seen in this sector as well. Surcharge revenues are also way down – which impacts revenue (even though it generally has less impact on the bottom line). Put it all together and you end up with a market that isn’t extremely favourable for carriers, nor is terribly bad. Revenues are down across the board and that makes business operations more difficult, but freight levels are stabilizing and capacity-sapping regulations are coming down the pike – either this year or next.”

The TCI is forecasted to rise into the mid-single digits later in the year, FTR added, reflecting weak economics up against expected regulatory drag.