While the trucking industry continues to be plagued by increased federal regulation and a shortage in trained drivers, market conditions for trucking carriers remains positive, according to the most recent Trucking Conditions Index (TCI).
The TCI — which measures such metrics as capacity, fuel costs, bankruptcies, cost of capital and freight — is compiled each month by FT, a leading freight transportation forecasting company. Any TCI above zero indicates an adequate business environment for trucking, while a figure above 10 means carriers can expect good conditions.
In August. the most recent month for which data was available, the TCI was 9.10, one of the highest points for 2014. In July, the TCI was 8.49.
Capacity Reaching Its Limit
While trucking conditions may be somewhere between adequate and good, there are still lingering problems for the industry. Fuel prices continue to climb and, perhaps more significantly, capacity continues to approach its maximum.
Current truck utilization levels are approaching all-time record levels, according to Jonathan Starks, director of FTR’s transportation analysis. As the US economy continues to improve and more freight is being shipped via trucks, it could result in strained capacity and even higher rates among carriers.
“With overall capacity remaining tight and continued cost pressure at fleets, we can expect to see freight rates moving higher into 2015,” Starks said in a news release. “Spot rates are edging lower — from a very high level — but contract rates are still showing signs of acceleration. Growth in the use of outsourced capacity (ie. broker and spot markets) is joining wage increases as a main driver of cost increases. Fleets are using more outsourced capacity, a segment which regulatory impacts are especially strong.”
Driver Shortage Leads to Higher Wages
Recruiting and retaining truck drivers has become a big issue in the trucking industry in recent years. Yet the demand for freight services remains high. This dilemma is one of the reasons freight costs are increasing.
Bob Costello, chief economist at the American Trucking Association, said the situation is becoming dire.
“Today, the industry has in the range of 30,000 to 35,000 unfilled truck driver jobs,” Costello told Logistics Management. “As the industry starts to haul more because demand goes up, we’ll need to add more drivers — nearly 100,000 annually over the next decade — in order to keep pace.”
US Xpress announced that it was instituting an average 13% increase in base mileage pay for over-the-road solo truck drivers, effective August 25. The company’s chief operating officer, Eric Fuller, said that the move was a direct result of the company’s need to recruit and retain qualified drivers.
“Listening to feedback over the years, we know driver pay is a very important aspect for our drivers and drivers in the industry,” Fuller said.
New Federal Regulations
Changing federal regulations on trucking is also affecting the industry. Hours-of-service rules now require drivers to have a minimum of 34 hours off-duty before they can restart their next work week. Plus those “restarts” are now limited to one per week.
The new rules also require a minimum of two periods of off-duty between 1 a.m. and 5 a.m. on consecutive days, which is causing a scheduling and logistical nightmare for TL operators.