Positive economic indicators and strong freight demand are improving trucking’s prospects for 2004, according to analysts, but they caution that rising fuel prices and new hours of service (HOS) rules could cause trouble.
“The indicators so far make 2004 look like a good year for trucking and the transportation industry,” Jeff Chung, head of the logistics practice for California-based investment banking firm USBX, told Fleet Owner. “We’re seeing much more freight volume and more black than red on trucking financial statements.”
According to the American Trucking Associations (ATA), truck tonnage surged 14.6% in December 2003 following a 5.6% rise in November. Overall freight volume increase 3% in 2003 versus 2002.
“This was the first December increase in our Truck Tonnage Index since 1997,” said ATA chief economist Bob Costello. “I believe that inventory rebuilding likely added to December’s strength in addition to stronger volumes from an improving economy. January freight volumes also looked quite strong ... a good sign for the industry since the first month of the year tends to be weak, too.”
Fuel prices, however, are a growing concern. The national average price of diesel fuel hit $1.61 last week, up 3.5% from the same week a year ago. The introduction of new HOS rules Jan. 4 has hurt carrier productivity as well, though the full impact of the new rules isn’t clear yet.
“There’s already a huge shortage of drivers and the new HOS rules will add to that pressure,” said USBX’s Chung.
Still, carriers are doing much better financially lately, an encouraging sign, said Chung. For example, truckload carrier J.B. Hunt said its net profits rose over 45% in 2003 to $95.5 million. Swift Transportation reported a 33.2% increase in profits to $79.4 million. And Knight Transportation posted a 27% net profit increase to $35.5 million.