Today’s Pickup: Shippers Index improves slightly; capacity tightens

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Good day,

The Shippers Conditions Index has improved slightly in August, although it remains in negative territory, according to the latest update from FTR. At the same time, DAT reported a decline in capacity last week on the spot market, which occurred before Hurricane Harvey struck Texas.

The hurricane is expected to tighten capacity even more as thousands of trucks are diverted to relief shipments and restocking thousands of retail stores in the area.

FTR said the SCI reading for August was -0.7, which is near the neutral reading of zero. The firm expects the SCI to remain fairly moderate in the near term due to slow contract pricing increases and a modest weakening of the regulatory environment.  Monthly data also indicates a slower growing economy for the balance of 2017 with matching slower freight growth.

Despite this, FTR says indicators remain pointed to tighter capacity in the new year.

“Weak contract pricing is helping to keep the SCI in relatively neutral conditions,” said Jonathan Starks, COO. “However, spot market pricing is approaching 20% y/y increases, and contract increases are only a short time from occurring. More importantly, Hurricane Harvey’s impacts on Texas and other gulf region states is strong enough to affect nearly 10% of the trucking market. That could serve as a catalyst for further capacity constraints and stronger rates as we head into the fall shipping season.”

The Shippers Conditions Index tracks the changes representing four major conditions in the U.S. full-load freight market. These conditions are: freight demand, freight rates, fleet capacity, and fuel price.

On the spot market, posted loads climbed 1% for the week ending Aug. 26 while capacity fell 1.8%. Van load posts increased 6% and truck posts declined 1%; flatbed load posts declined 7% while truck posts dipped 3%; and reefer load posts increased 5% and truck posts fell 2%. Reefer volumes continue to tick up, with reefer demand being especially strong in the Upper Midwest. Load-to-truck ratios rose for vans (5.2 loads per truck, up 7%) and reefers (10.0, also up 7%) but declined for flatbeds (26.5, down 4%).

For rates, dry van spot pricing settled at $1.78 per mile, with flatbeds at $2.18 and reefers at $2.07.

Did you know?

With all the aid moving to Texas to help support Hurricane Harvey recovery efforts, have you ever wondered how many bottles of water can move inside a single trailer? The answer is about 41,000.

Quotable:

“Katrina was a horrible storm that impacted homes, families, and business. With Houston, you have that, plus all of the freight that normally goes in and out of there. Now that freight has to get where it needs to go through other places.”

- Eileen Hart, DAT’s vice president of marketing and corporate communication, in an interview with Fleet Owner

In other news:

Port of Corpus Christi remains closed

A drilling ship broke free from the dock and sank a tugboat, causing additional delays in reopening the port of Corpus Christi following Hurricane Harvey. (Transport Topics)

What’s holding down inflation?

A new theory has arisen as to why inflation is not growing faster as typically happens in a growing economy. There is now a belief that effective supply chain management is reigning in costs and keeping prices lower. (Supply Chain Brain)

California looks to reduce emissions further

The White House may be looking for roll back some emissions standards, but in California, legislators are looking to boost funding to further reduce truck and bus emissions in the state. (Heavy Duty Trucking)

Logistics firms rush to help Harvey victims

U.S. logistics firms have gone all in in supporting Hurricane Harvey relief efforts, led by the American Logistics Aid Network. (Supply Chain Quarterly)

Houston’s recovery could slow U.S. economy

The Houston region contributes to 2.4% of the nation’s economy, meaning that any long-term recovery could impact the nation’s economy. (USA Today)

Final Thoughts

Much has been written about the impacts of Hurricane Harvey, but the truth is right now, no one knows the lasting effect that storm will have on Texas and the nation. How high might gas prices climb? How long will it take for shipping in the region – trucks, rail and ships – to return to normal? What about infrastructure repairs from all the flood damage? We may be dealing with Hurricane Harvey for years throughout the country.

Hammer down everyone!