BLOOMINGTON, Ind. – FTR Transportation Intelligence provided its four key insights into the transportation industry for 2015, with the U.S. government’s passing of a five-year highway bill at the top of the list.
“Finally, we got a transportation bill,” said Larry Gross, senior consultant for FTR. “Five years of assured funding is a positive thing.”
FTR pointed out that the bill was more of a ‘transportation bill’ than a ‘highway bill’, and that it provides 15% more in capital support than did the previous piece of legislation, it has a freight orientation and that it touches upon a need to get younger drivers trained and behind the wheel, though more was required to be done in this area.
“This is an item that could have had a major effect on the driver population,” Gross said, “but we’ll have to wait on that one.”
The bill offers an under-21 driver training program solely for military veterans, leaving out younger potential drivers who have not served.
Gross also highlighted the Dec. 10 passing of a rule mandating the use of electronic logging devices (ELDs), which many believe will improve safety and efficiency in the trucking industry.
The ELD rule will take effect Dec. 11, 2017 and is expected to impact approximately three million drivers.
Gross highlighted what the bill did not address, including no changes to truck sizes and weight, no fuel tax increase, no expansion of interstate tolls and, ultimately, no game-changers.
FTR said that the amount of additional driver hires that are required by regulation would remain intact well into 2018.
The second key to 2015 was the idea that any situation can change on a dime, using the decline in total rail carloads as an example, with Gross saying, “Things turned in a hurry during the winter of 2015,” and that the deterioration has been accelerating.
FTR said the decline in coal ‘has been breathtaking,’ as there has been a 31% drop in carloads since the third quarter of 2008.
“We hope and think that this is going to start to stabilize at the current levels,” Gross said, adding that the cheaper cost of natural gas has been a factor in coal’s decline.
On the truck side of things, Gross said the U.S. was “in a period of relative abundance” with high levels of utilization.
The October 2015 level of truck utilization was around 96%, with FTR projections indicating it would only go up from there, hitting near 99% in October 2016.
FTR said truck utilization levels of 95% or higher denotes a tight environment, while 90% or lower would be described as loose.
The third area of significance for 2015 was that the U.S. system is considered fragile and recovering from a downturn could take time, again underscoring the fact that rail movement averages has been slow to recover in the past couple of years.
FTR also said there was a huge overcapacity at U.S. ports, with Gross saying there was ‘chaos on the ocean side.’ Reasons given for the excess were the use of mega-ships, long gate times and mergers of major shipping companies.
The final key to 2015, according to FTR, was the notion that nothing lasts forever, and the only constant is change.
Gross underlined the previous economic recessions in the U.S. over the past few decades and showed how many of the post-1970s’ downturns had been much like the current recession; slow to recover.
Pre-1980s, with the exception of 1961, U.S. recessions were much quicker to recover, but in the end, each run their course and reach the finish line, but, as Gross said, could be affected by any number of factors, such as the Chinese market, natural disasters or terrorism.
Gross said one of the most underreported stories was declining business inventories since the early 1990s, and how in 2015 that inventory had started to creep north to 2003 levels.
FTR’s TCI measurement falls; rally expected for 2016
FTR’s Trucking Conditions Index (TCI) measure fell more than three points from September to October to a reading of 5.06, but is expected to rebound for truckers in 2016 as shippers become concerned with possible tight capacity in the second half of the year.
The decline comes as no surprise, as FTR had projected a decline through the fourth quarter of 2015, but is predicting 3% growth in the coming year.
“The trucking environment has slowed during 2015, but compared to recent history it is still operating at a reasonable level,” said Jonathan Sparks, COO at FTR. “Spot market activity is well below what was seen during the very tight conditions that stemmed from last winter’s disruptions. The Market Demand Index from Truckstop.com is down nearly 45% from prior year levels and is off even more significantly from the highs seen earlier last year. However, pricing on the contract portion of business has held up better than expected. Shippers seem to be choosing capacity over cost savings – especially when it comes to their core carrier base. This is a relatively easy choice given the downward moving fuel markets. The easy fuel comparisons are expected to change in 2016, and that will make it more difficult for shippers to be as lenient on trucker’s base rates. We expect conditions to improve as we move through the year as the market further prepares for tight truck capacity when the HOS, ELD, and speed governor rules are implemented over the next two years.”
Sparks said the main concern now was weakness in manufacturing and high inventory levels.
“The inventory situation needs to be corrected before we are likely to get a sizable burst of manufacturing activity,” he said. “Look for that to happen early in 2016. The recent ISM Manufacturing Index release showing a contraction in November may be the early signal for this necessary correction.”
FTR provides freight transportation forecasting for North America, collecting and analysing data likely to impact freight movement that affects trucking, rail and intermodal transportation.
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