Shippers face tight market for moving goods due to high diesel prices and delays in truck manufacturing

Retailers and manufacturers have faced ferocious market conditions for months as they ship goods around the country, and the situation is getting even tougher thanks to high diesel prices, according to a transportation analyst firm report released Monday.

The group’s Shippers Conditions Index (SCI) continued to tumble in March falling to -23.1, the most negative reading ever for the index and its second consecutive record low after sinking to -17.9 in February, Bloomington, Indiana-based FTR said.

The sharp decline was caused by the record surge in diesel prices and by extremely tight capacity utilization of trucks and trailers, FTR said. Looking ahead, the near-term outlook is “highly negative” even before factoring in a new surge in diesel prices occurring in early May.

FTR calculates the SCI number by tracking the conditions of four variables in the U.S. full-load freight market, including freight demand, freight rates, fleet capacity, and fuel price. Combined into a single figure, the number represents good, optimistic conditions when positive and poor conditions when negative.

“Fuel costs, labor costs, and ongoing congestion across the supply chain are going to keep the pressure high on shippers as we move into the summer months,” Todd Tranausky, vice president of rail and intermodal at FTR, said in a release. “There is little relief in sight, though there is the potential for downside economic pressure to reduce demand in the second half. But that is far from certain and also not the ideal way for shippers to experience better conditions and more capacity in their supply chains.”

Part of the reason that capacity is so tight is that truck manufacturers are struggling to build enough new vehicles, thanks to rising inflation and to uncertain supply chains that have created an undersupply of essential components like semiconductors and wiring harnesses, according to a report from the management consulting firm Berylls Strategy Advisors.

Those market forces drove order intake in the first quarter to sink into a 11% year-over-year drop at global truck building companies including Daimler, Traton, Volvo, and PACCAR, Berylls said. That slump came after truck buying demand had recovered quickly from the Covid-19 crisis, pumping up order intakes and average book-to-bill ratios to high levels during 2021, according to the firm’s analysis.

Despite those tumultuous conditions, truck builders are doing just fine financially, having increased revenue in industrial business lines by nearly 25% compared to the first quarter last year, and increased cumulative operating profit (adjusted) by 8.6%.
 
 "The situation on the global truck markets remains unusual," Martin French, Berylls' U.S. managing director, said in a release. "Demand is much higher than supply, and inflation is impacting the sales side of the business. While there are vehicle production hurdles to overcome, these are not the worst conditions to boost profits."