As Transportation Equipment Sales Spike, has the Supply Chain and Logistics Horizon Calmed, or Does it Remain Rough?

CHICAGO, IL:

Trailer orders of Dry Van Trailers recently have erupted as truckload companies and less than truckload carriers have begun to realize an increase in earnings from recently tightened capacity. The ACT Research Company mentioned that purchases for Commercial Dry Vans have been upwards of more than 102% in June of 2010 in a month which historically is a slow month for trailer purchases.

A number of analysts believe that capacity had hit bottom for truckload carriers and LTL carriers during February 2010. This rebound in transportation and logistics has rocketed truck Van Trailer sales around 165% year to date for 2010. Reefer Trailers have not encountered the volatility that Dry Van Trailers had and Reefer truck trailers are up 5% this year to date over 2009.

The spike in trailer sales has definitely followed by the raise in spot market pricing and transportation profitability for all carriers. Many truckload carriers, ltl carriers, and owner operators have simply parked trucks and much of their equipment has been taken off of the roads and relocated over to rig parking lots. Capital expenses have been meager at best the last number of years so some analysts are convinced this most recent increase in equipment demonstrates carrier profitability and fleet reinvestment.

While many transportation and logistics professionals are excited about the recent news, others remain skeptical of a long-term recovery for the trucking industry. Brad Hollister, Business Development Director for Freight Access, Inc. (http://www.freightaccess.com) commented that “A long term recovery may be difficult to sustain. The smaller carriers, owner operators, and other logistics professionals do not have access to available credit required to sustain a wide-spread recovery. These recent spike in equipment sales is a reflection of large companies not only running lean for so long, but much of this recent capital expenditure may be postponed equipment replacement which did not happen during the last 24 months.”

Many trucking companies and owner operators have decided to park their fleet as availability of capacity neared its highs in the fourth quarter of 2009 and first quarter 2010.. With capacity tightening this equipment will undoubtedly find its way back onto the roads and highways so that capacity will once more regain a market generated equillibrium. “Even though 2Q 2010 has been a welcomed surprise, there are still many risks to a long term recovery which does not have access to available small business capital,“ said Brad Hollister.

Hollister believes that a combination of newly purchased equipment and renewed dispatching of existing fleets will balance out the current opportunity which exists in the industry, in the upcoming months. Analysts should be cautious about seeing the large carriers purchasing equipment as a definitive sign of direction of industry recovery. Until the sentiment is shared across firms of all sizes, the market will have obstacles to overcome before a recover can be declared.

By Mark Friend, July 23, 2010

Freight Access, Inc. http://www.freightaccess.com is a Wisconsin Corporation. To contact Brad Hollister, Director of Business Development, call 312-450-3020 or bhollister@freightaccess.com.