PETROLEUM carriers must be doing something right. Results in the Modern Bulk Transporter Gross Revenue Report over the past two years suggest that the refined fuels hauling sector is financially outperforming other segments of the tank truck industry.
These fleets are doing reasonably well even though tank truck carriers in general are suffering through the worst economic crisis in the industry's 70-year history. Most importantly, petroleum fleets could be well positioned for a speedier recovery once the economy turns around.
The key to petroleum carrier success is twofold: Fleet capacity at or near equilibrium with customer demand and operational efficiency at historic highs. Petroleum hauling has undergone some truly revolutionary changes, and the carriers are reaping the benefits.
With regard to capacity, National Tank Truck Carriers conducted a member survey over the past year to determine how much equipment is in service. Cliff Harvison, NTTC president, will discuss the survey in detail May 20 during the NTTC annual meeting in New Orleans, Louisiana.
A surprising result of the research was the finding that the number of petroleum trailers in service today may be less than half of what was estimated 10 years ago. The new estimate suggests a total petroleum fleet of around 15,000 units, down significantly from the 48,000-unit figure that has been quoted since the mid-1990s.
Putting aside possible discrepancies in the estimates, the survey results indicate that petroleum haulers have succeeded in removing excess equipment. Consolidation seems to have played a role. For-hire fleets have been acquiring transport operations from marketers and refiners. A recent American Petroleum Institute review found that its seven largest members have a combined fleet of just 1,040 tank trailers.
Petroleum carriers have become extremely productive with their fleets. Evidence of this can be seen in the tractor revenue figures published with this year's Gross Revenue Report. It was a petroleum fleet that reported the highest 2002 tractor revenue at $303,458, and the average for petroleum fleets was $219,486.
Fuel haulers achieved those levels of performance by embracing strategies that call for 24-hour unattended loading and delivery. In many operations, two drivers are assigned per tractor, and each driver averages five to six loads per shift. These efficiencies seem to be only marginally affected by the heightened security requirements that came out of the September 11, 2001 terrorist attacks.
Can fleets hauling other liquid and dry bulk cargoes, especially chemicals, achieve the petroleum carrier levels of productivity? Probably not. The nature of the operations is different. Chemical shipments tend to cover longer distances, and drivers often are on the road for multiple days. Fewer loads are hauled in the space of a week.
Chemical fleets and others have made important strides in productivity, but more is needed. Many are maximizing utilization and efficiency through the latest in computerized dispatch and fleet management systems. Rail transloading and other intermodal capabilities also boost efficiency.
Tank trailer overcapacity remains one of the biggest handicaps for tank truck carriers in chemicals and other sectors. The NTTC survey shows that NTTC members alone operate 25,100 chemical and acid tank trailers. Non-code trailers (sanitary, sulfur, and so on) are in the 6,600 range. It's not even possible to speculate how many more of these types of tanks are in the hands of non-NTTC members.
One of the surprises of the survey was the dry bulk trailer count. NTTC members operate 9,700 dry bulk trailers. Looking at the wider universe of dry bulk haulers, the total count could be as high as 20,000.
All of this equipment is serving a chemical market that reportedly has shrunk by at least 13% since 1999. While some of the shipment volume should return as the economy improves, a majority of the lost tank truck loads probably are gone for good.
Consolidation seems to have brought a downsizing of the petroleum fleet, but the same hasn't happened in chemicals. Most of the tank trailers from chemical fleet mergers or shutdowns remain in service. Each carrier breakup spawns new fleet competitors. The chemical sector is awash in surplus tank trailers. It's time to cull the excess.
Chemical carriers and others never will be able to achieve adequate freight rate levels until the overcapacity is eliminated. They have a long way to go, but the petroleum haulers already have shown that it can be done.