Chemical Future Looks Promising
Oct 1, 2000 12:00 PM, Charles E Wilson
THIS HAS been a disappointing year for many chemical haulers operating in the United States. Business was flat or down through much of the year, making it difficult to keep drivers and equipment busy. The difficulties seem likely to carry over into at least the first part of next year.
Chemical haulers aren't alone, though. Even general freight carriers struggled through much of the year, with many hoping for a burst of holiday demand in the last quarter. Growth rates in the range of 2.2% are being predicted for truckload carriers and around 3% for less-than-truckload.
A variety of factors have contributed to the sluggish performance in the trucking industry. Chemical haulers in particular have been affected by the turnaround in the rail industry over the past year. The most serious problems were resolved, and rail service has improved dramatically. The result is that tank truck fleets lost the windfall of chemical cargo that they got three years ago.
While that factor alone probably may have had the greatest impact on chemical haulers, the Index of Leading Economic Indicators shows that the US economy is slowing overall. Economists say a recession is unlikely, but the economy should continue slowing into the early part of 2001 before stabilizing.
Many economists expect the pace of gross-domestic-product growth to fall to between 3% and 3.5% for the rest of 2000. It should remain in that range for much of 2001. They say it's not likely we'll return to GDP growth in the 5% range anytime soon.
Inventories of capital goods are rising. August marked the 11th time in the previous 12 months that inventories grew, offering additional evidence that consumer demand for many types of items is softening.
Overall chemical shipments are up 631/44% this year, but softness is apparent in some areas, according to the American Chemistry Council. Segments tied to the automotive and construction industries are slowing. Industrial chemical shipments have been flat or down through much of this year. Inventory levels are rising for some categories, including industrial chemicals and specialties.
Chemical haulers certainly have some tough months ahead. In addition to the drop in business, they must contend with climbing fuel prices, the driver shortage, and rising insurance premiums. The difficulties are likely to take a toll. We may be about to enter another cycle of mergers and acquisitions. Bankruptcies and closures are even possible.
However, the survivors face a pretty good future. In coming years, the best growth in the chemical industry will be in sectors that favor tank truck carriers. Chemical leaders will be consumer products, specialty chemicals, and life sciences.
Growth will come both domestically and internationally, benefiting not only tank truck carriers but also tank container operators. Global demand for chemicals is rising, and US chemical exports will increase by about 10% this year, according to the American Chemistry Council.
More good news for the future comes from the Council of Logistics Management meeting that was held September 24-27 in New Orleans, Louisiana. A survey of 434 shippers found that transportation spending is on the rise, and that 70% of the shippers surveyed plan to spend more on transportation.
Marketshare for truckload and less-than-truckload increased 3.9% and 1.3% respectively from 1999 to 2000. At the same time, rail shipments are flat and rail intermodal activity is down. Private fleet activity also is down. Plainly, the rail sector overall continues to lose marketshare to trucking.
So all in all, the future looks relatively bright. Chemical fleet managers just need to take the necessary steps to get their companies into shape for the longhaul.
© 2013 Penton Media Inc.
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