Trailer Sales May Have Peaked in First Quarter
June 07, 2000
Buoyed by a sustained strength of the U.S. economy, trailer sales showed significant increases in the first quarter of 2000, but it could be downhill from here, says Economic Planning Associates.
According to the latest manufacturer survey by the Smithtown, N.Y., research firm, first-quarter shipments totaled almost 81,000 units, up 7.2% from first quarter 1999 and 10% from fourth quarter. Van trailer shipments totaled 63,150 units, up 7.6% from last year. Non-van shipments came in at about 17,800 units, up 5.8%. Insulated, dry van, tank, low bed and dump trailers all showed substantial gains.
“Many customers markets in the U.S. are supporting continued high levels of transportation equipment demand,” noted EPA President Peter Toja. Construction activities are strong. Increased shipments of chemical and plastics products, along with higher exports of liquid foods and beverages, has led to a rebound in profitability of the chemicals, plastics and food industries, he said. Aggressive government response to reports of steel product “dumping” by foreign producers, coupled with rising construction activity and increased durable goods output, has stimulated domestic steel production and improved profits, he added.
But Toja cautioned that some negative factors will dampen trailer demand this year and into 2001. “Profits of the major carriers are under intense pressure this year,” he said, noting that first quarter profits for publicly held truckload and less-than-truckload carriers were about 10% above first quarter 1999 but profits were down 3.3%. Reasons include higher fuel costs, increased driver compensation, and e-commerce start-up costs.
Sales of new trailers will also likely be slowed by higher interest rates, which do not increase capital equipment costs but dampen consumer spending, which ultimately impacts the demand for freight services.
“Given the current financial constraints, the large amount of relatively new equipment in the system, and the memory of parked equipment earlier this year, we believe that the equipment purchase/lease decision will turn decidedly cautious this year and next,” Toja said. “From this point, we expect a gradual easing in quarterly trailer shipments through the end of this year and into the first half of 2001.”
Intermodal equipment will also feel the pinch. First quarter shipments of containers and container chassis were approximately 7,200 units, up 14% from first quarter 1999. According to Toja, U.S. container haulings in the first 15 weeks of this year were running 10.4% ahead of the same period last year. Canadian container movements were up 12.3%. The growth is attributed to strong economies in both countries plus expanding global trade.
“Given the acceleration in container haulings and the strong interest in 53-foot containers, we look for continued growth in container and chassis demand,” he said. “However, our industry sources are indicating a marked slowing in orders in recent months, implying a digestive phase is about to set in.” Container and chassis shipments are thus expected to slow some this year and the first part of 2001.
For more information, contact Economic Planning Associates at (631) 864-4900.