While orders have been extremely strong, the industry’s long string of year-over-year (y/y) net order gains ended in June.
According to this month’s issue of ACT Research’s State of the Industry: U.S. Trailer Report, net orders of 20,048 trailers were down 1.3 percent y/y and 13 percent off month over month (m/m).
“Dry vans were the driving force in the last two months’ performances and solid volume kept that year-over-year improvement streak alive in May,” said Frank Maly, director of commercial vehicle transportation analysis and research at ACT. “It was dry van weakness in June that was responsible for the total industry’s negative y/y posting, while the other nine trailer categories were all in the black year-over year.”
Seaport Global transportation analyst Michael Shlisky characterized the ACT data as “mixed” for the industry, noting orders were up 12 percent in the quarter compared to 2017 and 22 percent year to date.
But, he noted, refrigerated (up 8 percent) is the only major category that increased over the prior year.
“We believe this is due to an industry shift to increased fresh-food deliveries,” he said in an investor letter.
Additionally, backlogs are up 35 percent y/y and remain close to multi-year highs.
“We believe that while some larger customers are ordering for 2019, without order books that are fully open for next year, order quantities may remain constrained through the summer,” Shlisky said.
Looking ahead, ACT’s trailer production forecast is 320,000 units for 2018, an increase of 10 percent from 2017, but is expected to decline 7 percent next year. Still, production will remain well above normal replacement and “could turn higher from here” as fleets try to mitigate a driver shortage and ELD challenges with “new efficiencies” such as drop-and-hook, which requires more trailer capacity, the note concludes.
“Production surged sequentially in June,” Maly said. “While build usually increases in an end-of-quarter month, there were also extenuating circumstances last month. Reports of red-tagged units being moved to completion were heard and that shift from work-in-progress to completion artificially increases calculated build rates.”
Additionally, the report noted that fleets are experiencing a catch-22 in that they are too busy to retrieve completed units, but having those trailers could help ease their capacity challenges, a trend ACT Research has noted for the past several months.