Backlogs Send Heavy-Duty Truck Orders Plummeting to 3-Year Low

June 06, 2019 by Alan Adler, @AlanAdler

Orders for heavy-duty trucks continued plunging in May, falling 70 percent from the same month a year earlier.

Motor carriers and shippers placed orders for just 10,800 trucks in the heaviest, Class 8 weight segment last month, the lowest since July 2016.

Year to date, orders are down 64 percent, according to ACT Research.

A variety of factors contributed to the dive that began in November. Companies placed record orders last year, sapping up all the truck assembly line spots this year. They ratcheted back buying this year. Tepid freight growth and a slowing economy also have slashed demand for new trucks.

“Obviously, orders today are for deliveries in 2020, so it does provide the opportunity for some customers to say, ‘Hey, let’s take a wait and see,’ ” said Troy Clarke, chief executive of Navistar International Corp. He took questions from analysts earlier this week following the company’s latest earnings report.

2018 ORDER BOOM

The timing of the order bonanza in mid-2018 created this year’s trough. About 220,000 orders await assembly by major manufacturers. That’s about the same time that last year’s order surge began, said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence.

“The 2019 order pattern was pulled ahead by three months. So, May’s orders are similar to what you normally would see in August,” he said.

The early orders last year targeted a robust freight market with too few trucks to meet demand. Fleets spent a windfall from business tax cuts on new equipment. Parts shortages lengthened delivery times, forcing some shippers to turn away business.

Independent truckers cashed in as spot freight rates jumped as much as 30 percent.

MORE TRUCKS

So far this year, the rates for same-day loadings are about 15 percent below last year’s, according to DAT Solutions, which tracks load prices.

“Brokers and shippers are finding it much easier to find (trucking) capacity,” said Eileen Hart, a DAT spokeswoman.

Contract loads with prices set in advance averaged 4 percent increases for dry and refrigerated vans in the first four months of the year, Hart said. Flatbed contracts rose 7 percent.

Those rates are in line with a 7.4 percent increase in April tonnage reported by the American Trucking Associations. The trade group has not released May’s figures.

SPOILED CHERRIES 

“I do not think the fundamentals underlying truck tonnage are as strong as April’s figures would indicate,” said Bob Costello, ATA chief economist. But predictions of a freight recession “may have been overblown,” he said.

Cold temperatures and heavy rains this year are depressing agriculture shipments. Cherry growers in California expect to lose two-thirds of what was expected to be a record crop because of too much rain in May, according to DAT.

‘DROOPY’ ECONOMY

“The U.S. manufacturing/freight economy has been droopy since late 2018,” said Kenny Vieth, ACT president.

Freight growth has risen only slightly. Analysts now expect the U.S. economy to slow after growing 3.1 percent in the first three months of the year. New private-sector jobs in May came in at a nine-year low.

 

Alan Adler June 5, 2019
Threatened tariffs on Mexican imports coupled with higher taxes on Chinese goods could grind on trucking industry already seeing signs of slowing.

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