February Trailer Orders Double as Aging Equipment Is Replaced

This story appears in the April 4 print edition of Transport Topics.

Building on a surge of replacement demand that began last year, trailer manufacturers received orders for 21,990 new units in February — a 105% year-over-year increase.

The February order count was 25% higher than January’s total, and orders for the first two months of 2011 are 87% higher than the same period of 2010, ACT Research Co. reported last week.

The continuing rise in orders, coupled with an industry-wide backlog that already approaches 100,000, foreshadows a strong 2011 for the trailer industry as trucking fleets continue to replace their aging equipment, ACT said.

ACT noted that shipments of finished dry vans to customers spiked 225% in February. Dry-van trailers and refrigerated trailers “make up about 70% of all trailer demand, [and] both of those components of the industry are at record ages,” said Kenny Vieth, ACT’s president and senior researcher. He said he expects U.S. trailer makers to post a “solid industry performance during 2011.”

Trailer suppliers endured two of their worst years ever in 2009 and 2010 as trucking companies delayed equipment purchases. In 2009, new trailer orders came in at 81,300 — the lowest total since 1975. Last year, the total was about twice that many, according to ACT.

ACT’s latest research showed that the February order surge was broad-based, with orders rising for all nine trailer categories tracked by ACT.

According to ACT, 225% more dry-van trailers were shipped from factories in January and February than in the first two months of 2010. Moreover, buyers in the 2011 period ordered 90% more dry-vans than they did a year ago, ACT said.

ACT also noted that trailers are being hauled off of manufacturers’ lots almost as quickly as they can be built because demand from fleets is urgent. In the first two months of the year, overall trailer shipments from factories were up 116%, compared with the year-ago period, ACT said.

An executive at Hyundai Trans-lead, San Diego, also noted the rapid drawdown of his company’s inventory.

“The demand is immediate,” Glenn Harney, Hyundai Translead’s chief operating officer, told Transport Topics. Trailer makers “are not building trailers for inventory; they’re [building] sold trailers.”

At the same time as trailer demand is booming, manufacturers are contending with rapidly rising materials costs, Harney said.

“Tire prices are still very volatile, and anything made of steel is pretty volatile right now,” Harney said.

The price of oil has shot up as war in the Middle East and continuing disaster recovery efforts in Japan have commodities traders wringing their hands, news services reported. Crude oil futures last week were trading close to their 30-month high of about $105 a barrel, according to data gathered by Bloomberg News.

Higher costs for raw materials are in some cases translating into abrupt increases in costs for trailer manufacturers.

“The price increases are coming with increasing voracity as this year goes on,” said Craig Bennett, senior vice president of sales and marketing for Utility Trailer Manufacturing, City of Industry, Calif. The increases are for “tires in particular, but wood floors are not far behind.”

Dealing with price increases, of which Utility Trailer is sometimes made aware of on short notice, is especially troublesome, considering the voracious appetites U.S. fleets have developed for replacement trailers, Bennett said.

“We have some suppliers who will give us a price increase with 60 days’ notice, and that’s ridiculous,” Bennett told TT. “We try to fire those suppliers. When you have a backlog of four to five months and a price increase with two months’ notice, it doesn’t work so well.”

Some suppliers, said David Gilliland, vice president of branch sales and operations for Great Dane Trailers, are indeed “having a difficult time keeping up with demand.”

However, “We have not had a supply problem in general, with the exception of some restrictions on tires,” Gilliland said. He declined to specify what these restrictions were or which tire makers had imposed them.

ACT’s report found that besides improvements in the dry-van and refrigerated-trailer segments, a supply crunch is occurring in a niche trailer segment — pneumatic-bulk and liquid-tank trailers.

Demand for the pneumatic-bulk trailers make up only about 1% of the U.S. trailer market, liquid-tank trailers only about 2% to 3%, Vieth said. However, demand for those trailers has been “really going through the roof,” Vieth told TT.

He attributed the increase to a rise in natural-gas extraction projects throughout the United States. The extraction techniques used require large on-site quantities of sand and water, which are usually transported by truck in pneumatic-bulk and liquid-tank trailers, respectively.