Question of future capacity looms for shippers and carriers
Jeff Berman, Group News Editor -- Logistics Management, 11/1/2009
WALTHAM, Mass. — Despite some recent sequential increases in trucking volumes, capacity has steadily continued to leave the marketplace in recent quarters.
According to trucking analysts, the reasons for the capacity exodus vary, but they generally come back to common refrains, including low demand and consumer spending in conjunction with tight credit markets. It’s this state of capacity in 2009 that has many in the industry wondering if there will be enough once the economy rebounds.
In fact, many believe there won’t be nearly enough to meet future demands. According to FTR Associates President Eric Starks, when the economy fully recovers, the capacity picture won’t be pretty. As demand returns, said Starks, carriers will be found scrambling. “Carriers are not going to add capacity ahead of time, because that requires cash on hand and freight to move,” he said.
While the signals appear somewhat ominous, there are some signs that things are improving on the capacity front, according to a recent report by Avondale Partners analyst Donald Broughton. In his report, Broughton notes that in the second quarter Avondale estimates that 370 companies with an average fleet size of 18 pulled 6,725 trucks from the road—less than 0.4 percent of the nation’s over the road heavy duty truck capacity. This is the lowest number of companies recorded and the smallest average company size recorded since the first quarter of 2007, Broughton explained.
“The rate of companies failing is less than 40 percent of what it was in the second quarter last year. And with the drop in the average size of fleet (from 47 to 18), the total number of trucks being pulled from the road is less than 15 percent of last year’s second quarter rate,” wrote Broughton. “This estimate does not include the industry wide trend, especially in larger fleets, to rationalize the size of their ongoing fleets. However, it does represent a marked decline from the 46,025 trucks pulled from the nation’s highways in the second quarter of 2008.”
Even with these encouraging signs, larger problems loom when it comes to truck tonnage levels—and capacity—returning to healthy and productive levels. As things stand, tonnage is still well below last year’s levels, with the American Trucking Associations reporting that its advance seasonally-adjusted for-hire truck tonnage measure has been up on a sequential basis three of the last four months.
As for how things look going forward in terms of the overall health of the trucking industry, it’s clear that more time is needed before order is truly restored.
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