Tank fleets remain a trucking bright spot
Oct 1, 2008 12:00 PM, By Charles E Wilson
First the bad news: Overall freight levels fell dramatically since July, and the situation is likely to get even worse for trucking companies in coming months. Now the good news: Tank truck carriage remains one of the few bright spots in trucking and continues to outperform the rest of the sector.
This was part of the annual economic forecast delivered during the American Trucking Associations' 2008 Management Conference October 5-7 in New Orleans, Louisiana. The assessment came from Bob Costello, ATA chief economist and vice-president, who pointed out that at least 2,000 fleet failures had been recorded through September and more were likely.
Costello wasn't the only conference speaker warning that tough times lie ahead for the trucking industry. During his “State of the Industry” address ATA President Bill Graves said the following: “The economic slowdown (highlighted by the housing and automotive industries) has had a devastating impact on our tonnage, and the recent financial meltdown on Wall Street severely impacts the credit markets [fleets] rely on for the capital to run [their] businesses. I'm not confident anyone knows if we've yet bottomed out…and how long it will take before anything close to an economic recovery will occur.”
Many economists now are predicting that we are in a recession that could last into 2010. Across the United States, new home construction has fallen by 23% overall, and new car sales are plummeting.
Inflation continues to take a bigger bite out of personal incomes, and 56 cents out of every dollar is going to food, fuel, and housing, according to Costello. He added that it is possible we could see negative spending during the holiday season this year.
A recent report from FTR Associates said Wall Street is in turmoil, with bank takeovers, bankruptcy, and bailout actions sending credit markets into crisis mode. Employment has declined in the United States, and there are growing signs of a more pronounced global slowdown.
These factors are all contributing to the declines in freight shipments this year. In turn, Class 8 truck sales have weakened, and order backlogs are at historically low levels. If the recession extends through 2009 and beyond, Class 8 truck factory shipments could fall below 200,000 vehicles. One reason is that many truck fleets have indicated that they do not anticipate a truck pre-buy in 2009 in advance of the 2010 engine emission requirements.
While those are chilling statistics, all is not bleak for the tank truck industry. Tank truck loads are still projected to grow by 1.4% in 2009 and 1.3% in 2010. Consumers need many of the products hauled in bulk (especially foods and refined petroleum) no matter what the economy may be doing.
Tank truck carriers also would benefit from any increase in public works programs. Some economists have suggested that a $300 billion government works program would do more good for the US economy than the $700 billion Wall Street bailout. Such a program would focus on repairing and expanding the US infrastructure.
Most tank truck carriers should be able to find enough business to weather the current economic difficulties. It may not be pleasant, but most of the industry will make it through. Further, this recession will end (hopefully sooner rather than later), and the tank truck industry will be able to get back on the growth track.
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