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'Inverse perfect storm' brewing in trucking: Analysts
Friday, 12 March 2010 00:00

COLUMBUS, Ind.—Improving trends in the economy and the onset of capacity tightening in the truckload sector point to stronger demand for commercial vehicles in late in 2010 and into 2011, according to ACT Research Co. (ACT).

In the latest release of the North American Commercial Vehicle Outlook, ACT continues to project heavyduty (Class 8) vehicle production will grow 19 percent year-over-year in the second half of 2010 before ramping up significantly to 77 percent growth in 2011.

Medium-duty vehicle (Classes 5-7) production, which is largely tied to the health of housing and construction, is expected to see a more steady and gradual increase in production, growing 20 percent in 2010 and 30 percent in 2011.

"Our trucking surveys are showing improving trends in volumes and pricing and our used truck analysis has shown modestly firming values for several months," said John Burton, vice president-transportation sector. "All indications point to capacity tightening in the truckload sector by mid-year, which will drive improved profitability and lead to replacing an aging fleet."

Carriers, meanwhile, corroborate many of those views.

A separate survey by Transport Capital Partners found that carriers and industry vendors think capacity is tightening in February.

According to TCP, carriers expect this month to continue to improve as inventory is moved. While carriers are uncertain about April, they expect May to be very strong.

"The three factors of volumes, rates and driver shortages are setting the industry up for winning an 'inverse perfect storm,' where carriers will finally be able to post much-needed earnings," TCP said.

TCP's recent Business Expectations Survey indicated that 10 percent of carriers reported that they have been able to selectively raise some rates; and some of those carriers are hiring drivers to fill parked trucks.

However, good drivers are hard to find because of extended unemployment benefits at high rates.

The one roadblock to fleet expansion, however, is securing financing as finding lenders to capitalizing trucking right now is also difficult.

TCP found that carriers are still wary about adding equipment, as fleets will be facing increased credit standards and tougher lending terms from banks. Fleets are also concerned about who will supply financing for owner-operators to replace older trucks., 3/12/2010