Shippers grapple with grueling rate environment, dampening market conditions, report shows

Shippers continue to face tough market conditions as transportation capacity remains tight, freight rates are increasing, and fuel costs continue to rise.

Industry researcher FTR this week reported marginal improvement in its monthly Shippers Conditions Index (SCI) for May, the most recent data available, and noted that the impact of freight rates on the market hit their most negative level in the history of the index. The SCI remained in negative territory, registering -11.3 for the month, indicating pessimistic conditions throughout the industry.

The SCI tracks changes in the U.S. full-load freight market by combining data from four metrics: freight demand, freight rates, fleet capacity, and fuel price.

FTR said a strong improvement in trucking capacity utilization in May helped offset the tough rate environment, but added that rising fuel costs and other pressures will continue to dampen conditions, which they said remain “extremely challenging.”

“It remains a period of tough sledding for shippers as utilization and rates will remain difficult factors to offset in the near term,” said Todd Tranausky, vice president of rail and intermodal at FTR. “The fall peak season will add increasing pressure to supply chains and could create additional negative pressure in the index over that period.”

As the summer rolls on, rising fuel costs continue to be a large part of the problem. Diesel costs have increased 40% from a low point last November, according to late July data from the U.S. Energy Information Administration (EIA), and are contributing to the rising costs shippers are facing. Oleg Yanchyk, chief information officer for freight procurement software firm Sleek Technologies, points to rising surcharges in the trucking market as an example. Yanchyk says fuel surcharges—the average cost per mile that shippers pay carriers—have increased by $404 per week according to Sleek Technologies data. At the same time, he says actual diesel truck costs increased by $486 per week, adding even more costs for shippers.

“That difference of $82 [per] week has to come from somewhere, and carriers increase the linehaul portion of the load they charge [to make up the difference],” Yanchyk explains.

Further complicating the issue, he says carriers are spending more for “empty miles diesel costs,” which is the amount that each truck spends on fuel for miles they don’t get paid for by shippers—to get from one load to another or make a run to their yard, for example.

“Empty miles diesel costs coming out of the carriers pocket as a cost of business increased by $73 [per] week,” Yanchyk says, again using Sleek Technologies data and government data on rising fuel costs. “This has to come from somewhere too, and carriers look to charge shippers extra in the linehaul portion to cover their expense.”

Yanchyk says it can be difficult for shippers to manage the increased costs, and although he agrees that the near-term outlook is challenging, he says some relief may be on the horizon in 2022.

“There’s going to be a short-term impact with increases, but then [it will] level off toward the end of the year and possibly decline a bit,” he says. “Quarter one [2022] we should see some decreases.”