Improved economy prompts tank truck sector to raise hopes for significant improvement
Oct 1, 2003 12:00 PM, By Mary Davis
As economists and others predict the United States appears to have bottomed out of its economic plunge, some of those in the tank truck industry are beginning to feel more optimistic at the future outlook — with some reservations.
“Overall, I'm both positive about today's tank truck industry and optimistic about our future,” says Cliff Harvison, National Tank Truck Carriers president. “Reports from our members indicate moderate but steady volume growth in terms of both petroleum and food. While the rebound in the chemical sector is more tenuous, the reality is that today's consumer is driving the up tick in the economy. Sooner or later, that means more chemical shipments for both domestic consumption and exports.”
Harvison points out that chemical carriers suffered more than other carriers at the beginning of the decade as a result of a downturn in the chemical industry. Some chemical shippers relocated production offshore. Others closed some facilities.
“The tank truck sector reacted by controlling capacity while increasing utilization,” says Harvison. “Today, our members are poised to deal with volume increases. The lessons learned in the past three years will serve them well.”
Today's regulatory environment also plays a key role in the industry's future. “The biggest potential glitch on the immediate horizon is implementation of the Department of Transportation (DOT) new hours-of-service (HOS) regulations,” Harvison says. “There will be a cutback in driver productivity when the new rules kick in January 4, 2004.”
The biggest impact of the HOS will be on the long-haul carriers, particularly food and chemical companies.
“Today, it's incumbent on both shippers and carriers to sit at the same table, look at the details of the new regs, understand how they will affect each existing traffic lane, and plan to make changes,” Harvison says. “Yesterday's expansive times — counting loading, unloading, sampling, as off duty — are history. The cost implications are obvious and can't be avoided.
“To the extent that shippers and consignees can ease these pressures, everybody benefits. After all, they control driver productivity at the loading and unloading points.”
Builders and vendors
Cargo tank builders and other vendors also are having to deal with increasing regulatory controls, and some are finding the procedures frustrating, if not shackling. David Amthor at Amthor International, Walden, New York, and Gretna, Virginia, says: “All the federal regulations are getting more stringent as years pass. Between DOT, the Environmental Protection Agency, Occupational Safety and Health Administration, etc, it is making it very difficult for companies to have the utter ability or to afford to comply to these regulations. I am not saying that the individuals that ‘skate’ on the current regulations should not be penalized for it, but a lot of companies feel that it is getting entirely too stringent and are having too much expected of them in these niche industries, and that the costs incurred to comply, do not justify the profitability to the industry.”
Having to deal with federal regulations is not all bad news, according to Mike O'Donell at Stuart Tanks Sales Corporation, Elkhorn, Wisconsin. “Some new rules that will affect our business in a positive way will be the HM-123, and the changes it brings to our industry — along with the retrofit of existing equipment with vapor recovery attachment on the chemical vapors at the loading and unloading point,” O'Donell says.
The Research and Special Programs Administration (RSPA) this year issued a new rule (49 CFR Parts 107, 171, 172, 173, 177, 178, and 180-HM213) that updates and clarifies regulations on the construction and maintenance of cargo tank motor vehicles. The vast majority of the new rules apply to cargo tank manufacturers and those who test, inspect, and repair specification equipment.
Revisions applicable to all cargo tanks include the marking of emergency shutoff devices, recertification to original specification, and cargo tank qualification and maintenance.
Revisions applicable to DOT400-series include structural integrity requirements, manhole marking, road clearance, maximum allowable working pressure (MAWP), leak testing using Environmental Protection Agency (EPA) Method 27, and weld joints on DOT407 cargo tanks.
Other revisions include those applicable to MC331 and MC338 cargo tanks, such as consistency with DOT400-series specification, remote shutoffs, MC331 inlet and outlet fittings, visual inspections for insulated vessels, and leakage tests for tanks hauling anhydrous ammonia.
Despite the crunch from regulations, many in the industry are predicting the US economic recovery will spill across the tank truck industry, including the supplier arena, and give a much-needed boost. Demand for new equipment is on the rise.
Peter Toja, a Smithtown, New York, industry analyst and president of Economic Planning Associates, agrees. “After two consecutive annual declines, tank trailer shipments will rebound in 2003 and the gains will extend through 2004,” he says. “Based on first half shipments and continued growth in customer markets during the second half, full year 2003 shipments will amount to about 4,400 units, an 11.4 percent gain over last year.
“Stronger activities among food processors, chemical producers, and petroleum refiners will boost 2004 shipments to approximately 5,200 trailers, an 18.2 percent hike over this year's estimate.”
According to other industry sources, manufacturers will build about 1,000 petroleum trailers in 2003. Annual average production for the past five years was around 1,300.
In 2004, projections range from 1,100 to 1,300 for petroleum trailers.
At Stuart Tank, O'Donell expects demand for equipment will rise in 2004 because of the new tax relief package that will aid carriers, and he points out that the industry's fleet is aging, which is likely to call for replacements.
He's not the only person to predict an improved industry economy for 2004. Jerry E Beall, chairman of Beall Corp, Portland, Oregon, says that quoting activity in the company is definitely increasing in its territory, which is the western half of the United States. “There is a possibility that the first quarter of 2004 could be a definite improvement,” he adds.
As for 2003, Beall says the company has experienced some improvement during the first half of the year, but a steady upward trend isn't occurring. Petroleum equipment has been much more active than construction equipment. Although large projects have been approved in some states, contracts are not being actuated in states like Washington and Oregon.
At Heil Trailer International, Chattanooga, Tennessee, President Bob Foster has a positive outlook. “We see continued improvement in our markets,” he adds.
“We see a slow and gradual upswing, but the industry is still suffering with a gross over-capacity of equipment (existing fleet size) and manufacturing facilities,” say Jack Olsta and Taylor Craigen at The Jack Olsta Company, Huntsville, Texas.
Olsta has watched the petroleum industry level off, compared to a year ago, and stabilize. “We are pleased however to see an upswing in new orders over the last few weeks, but are unable to determine if this a sustainable trend,” he adds.
Like Harvison, Olsta recognizes that the chemical industry is probably suffering the most with over capacity in the manufacturing of tank trailers, as well as the overcapacity of the existing fleet size.
For dry bulk sales at Olsta, there are two areas to be considered. Large cube bulkers sales, dominated by the plastics industry, continue to be very soft. Small cube bulker sales, dominated by the cement industry, have shown some life, and are expected to continue on a slow upward trend that began earlier this year.
The petroleum and cement used-trailer market has been steady, Olsta adds.
O'Donell also reports that construction early this year brought a demand for small cube pneumatic equipment, but added it seems to have tapered off at this time.
“We feel the market continues to be soft with a continual surge in some areas,” says O'Donell. “Recently, increases in sales have been for petroleum equipment and foodgrade trailers. Chemical trailers continue to be very soft.”
Strong petroleum sales
Tom Anderson at LBT Inc, Omaha, Nebraska, is seeing some improvement in the tank market in general, but says the petroleum side has dominated sales. “The dry bulk market is overbuilt at this moment and demand is flat,” he says.
At WestMor Industries LLC, Morris, Minnesota, liquid petroleum gas (LPG) bobtail and carbon dioxide transport sales have been very strong, says Tim Esterling and Brad Backman. “Pent-up demand finally played out with increased purchases that had been on hold over the past year. WestMor Industries LLC realized more sales because of an in-stock inventory program offering and strong on-time delivery commitment,” Esterling points out.
The 5,000-gallon bobtail with stainless steel decking is steadily becoming most popular, along with electronic registers. Electronic compensators are proving to be real money savers for the customers, says Backman. Refined petroleum cargo tank sales as well as repair work and reconditioning continue to increase.
Next year's prospects look good for WestMor, Esterling and Backman say. They are forecasting continued strong sales conditions for LPG bobtails and pressure transports. “We are excited about 2004,” says Esterling.
In Canada, tank trailer makers are issuing good news. “Things at Comptank are surprisingly steady,” says Denis Marcus, Comptank Corp, Bothwell, Ontario, Canada.
He credits a newly-introduced fiberglass reinforced plastic (frp) tank trailer as part of the success. “The design has prompted a lot of carriers to order, thus keeping Comptank busy,” he says.
Alain Chatillon, Tankcon Frp Inc, Boisbriand, Quebec, Canada, has been frustrated with the US dollar exchange rate. “We've had a 25 percent spread in 10 months,” he says. “It changes so fast — no one ever expected that. In theory, my product went up 25 percent and the market won't absorb that.”
On the plus side, carriers with rubber-lined steel tank trailers are beginning to replace them with frp trailers. Some shippers in the bleach industry are specifying frp trailers for their products, he adds. That bodes well for the future.
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