Trailer Shipments Down 48%; Relief Could Come by End of 2001

TRAILER shipments were down 48% from the opening quarter of 2000, but the picture could improve in the final quarter of this year, according to Economic Planning Associates Inc president Peter Toja.

Industry executives and economic experts were expecting a very weak first quarter. But even that pessimistic outlook couldn't prepare them for what they got. It was, in the words of Toja, a “bloodbath.”

The decline was split nearly equally between van (50.4%) and non-van (40.9%). Drop-frame trailers were the only kind that showed an increase (23.1%, from 650 to 800), while dry freight showed the biggest decline (54.5%). Platform trailers (down 53.2%) were hit the hardest in the non-van category, with shipments plummeting from 7,700 to 3,600.

But the biggest plunge came with railroad containers, which were down 83.3%, with 300 shipped compared to 1,800 a year ago (excluding Hyundai and Manac). Combining that with the 41% drop in chassis, the total C&C shipments were down 51.8%.

“Moderate advances in consumer purchase have reined in previously rapid growth in merchandise imports, while the strength of the US dollar continues to dampen our export potential,” Toja said. “At the same time, a flattening in manufacturing output has limited domestic container movements.”

The picture wasn't any brighter in the Class 8 truck market: Retail sales were down 41.1% compared to the first quarter of 2000, with 34,562 units sold, as opposed to 58,654 a year ago. The last time first-quarter Class 8 numbers were down was in 1997, but that was only a 6.3% drop (from 41,444 to 38,802).

Demand To Remain Low

Toja said demand for new trailer equipment will “limp along” during the next two quarters.

“With sluggish carrier profitability, sharply higher fuel costs, major hikes in insurance premiums, and rising driver compensation costs, many fleets might well be placing investment programs on the back burner, awaiting more viable financial circumstances,” he said. “These adverse financial factors are also being exacerbated by low asset valuations as well as a tightening credit environment.”

He said the good news is that the aggressive stance of the Federal Reserve — which lowered interest rates four times in the first four months of 2001 — will stimulate economic activity later this year and throughout 2002.

“Interest rate reductions are already impacting residential construction as declining mortgage rates benefit the level of housing affordability,” he said. “The aggressive nature of the Fed's rate cuts will bolster confidence, which should impact consumer spending and stock valuations. Later this year, lower financing costs should facilitate capital equipment acquisitions and the initiations of a number of construction projects. With manufacturing schedules having been significantly lowered in recent months in order to reduce inventories, the eventual turnaround in consumer and business spending later this year will occur while inventories are relatively lean, thereby stimulating increases in manufacturing activities not only for the pickup in demand, but also to restock wholesale and retail inventories.”

He said a further impetus to manufacturing growth will come from a boost in exports caused by the improving economies of America's trading partners and a lower valued dollar.

“The pickup in domestic production of a variety of products will lead to increased traffic flows of materials, intermediate products, and componentry,” he said. “These increased traffic flows should begin to press truck capacity later this year, and with lower interest rates in the environment, we expect increased interest in trailer equipment later this year and throughout 2002.

“While we do not anticipate much improvement in demand this quarter, the second-half pickup in truck traffic will stimulate trailer shipments as demand for a variety of trailers resurfaces.”

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