Users of rail and truckload motor carrier services will not feel much rate pressure for the rest of the year as moderating demand, lower diesel-fuel prices, and the suspension of federal regulations governing a truck drivers' hours of service keep capacity somewhat slack, according to data from consultancy FTR.
Each month, FTR publishes a "Shippers Conditions Index," which is a compilation of factors affecting the supply-demand environment for shippers. In May, the index came in at -3.1, which indicates a manageable, though less than ideal climate for shippers. A reading below zero is seen as somewhat suboptimal; a reading below -10 reflects a crisis situation with acute capacity shortages and higher rates in the offing. The index focuses on conditions impacting truckload and rail carload shippers.
FTR said truck shippers are benefitting from a December law suspending through September 30 two provisions of the Department of Transportation's 2011 rule governing a drivers' hours of service: requiring drivers to take their standard 34-hour rest breaks only once every seven days, and forcing them to include in their rest cycles two breaks between 1 a.m. and 5 a.m. over two consecutive days. The so-called restart language was expected to cut truck productivity from 2 to 4 percent by reducing the number of hours that drivers could be behind the wheel. The temporary suspension of the FMCSA's policies had led to an opening of truck capacity that might have otherwise disappeared.
Carload rates have been restrained by slower economic growth and continued weak demand for coal, which remains the railroads' largest commodity.
Jonathan Starks, FTR's director of transportation analysis, said the firm predicted the year-long reprieve for truck users in late 2014 amid the suspension of the hours-of-service rules and a slowing of the economy. However, Starks said the break for shippers will be temporary, noting that shipper conditions will worsen in 2016 as the impact of government rules, such as the phasing-in of the use of electronic logging devices and perhaps the reinstatement of the hours-of-service regulations, put many smaller fleets out of business and lead to a tightening of capacity.
In addition, the U.S. economy will continue to grow despite currently disappointing data, with accelerating freight demand soaking up capacity and putting upward pressure on truck rates, Starks said.