Improving freight conditions and freight rates in 2017 is expected to lead to a rebound in carrier profitability in 2018 as well as a jump in new big rig orders by trucking companies, according to ACT Research, publisher of commercial vehicle (CV) industry data, market analysis and forecasting services for the North American market. Trucking firms, cites ACT, ordered 32,900 Class 8 trucks, those used on long-haul routes, in November, up about 70% from a year earlier. They ordered 35,700 Class 8 trucks in October, a 62% increase from September and a 167% increase compared with the same month a year earlier, according to FTR Transportation Intelligence.
Fleets are adding capacity as strong economic growth fuels surging volumes of freight through the nation’s transportation networks. Trucks are in high demand to carry record imports from ports to distribution centers, move machine parts and heavy goods for manufacturers and merchandise during the holiday shopping season, according to a recent article in the Wall Street Journal (WSJ). Shippers are paying higher rates as capacity tightens, driving incentives to put more trucks on the road.
“We’re seeing a lot of volume…and rates are following suit,” said Eric Fuller, chief executive of trucking company U.S. Xpress Enterprises Inc., in the WSJ article. “I think with increased rates people are feeling a bit more comfortable buying additional trucks.”
Additionally, as trucking firms tend to reserve new trucks from manufacturers in the final months of the year, the surge in orders portends that the industry expects the market to continue booming well into into 2018.
A majority of the big-rig orders is also coming from replacing older trucks, according to Stifel Financial Corp. analyst Michael Baudendistel. He projects the industry will build about 280,000 trucks next year, a 12% increase over the pace of this year. ACT analyst Kenny Vieth estimates 2018 orders at 322,000, saying that some manufacturers are offering deals on new rigs to gain more business as the market improves.
With new big-rigs set to take to the road, the real challenge for the transportation industry is finding enough drivers. The transportation sector has been struggling to find enough qualified drivers over the last few years due to a number of reasons, including demographics (aging population), regulations and lifestyle – the fact that truckers are away from home for long periods of time.
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Sources: WSJ, Truck.com, ACT Research