July Trailer Orders Increase, But Industry Remains Weak

This story appears in the Sept. 7 print edition of Transport Topics.

Net orders for new commercial trailers in July increased 16% from a year ago and were up 4% from the previous month, according to ACT Research Co.

The company’s chief analyst said trailer demand appears to be improving, although it is still weak.

“The current order levels are less than half of the usual industry replacement rate, but with seven of nine trailer types tracked posting increases in new orders from June to July, it appears demand is beginning to move in the right direction, if incrementally,” Kenny Vieth, a partner of ACT, told Transport Topics.

Industry executives cautioned that the July increase did not signal a turnaround, and even the most optimistic saw only lukewarm good news in the figures.

New trailer orders totaled 6,777 in July, up from a net of 5,842 in July last year, Vieth said, and up from 6,516 orders in June.

In its Aug. 28 report, ACT cautioned that the July increase resulted from “overlapping very weak comparisons from the second half of 2008,” rather than any dramatic increase in demand.

Trailer dealers have received 50,451 new orders through July this year, Vieth said. Orders for the year so far are down 39% from 2008, according to the Columbus, Ind., equipment research company.

“Demand for commercial trailers continues to be soft because of excess capacity and weak profits in the freight industry,” Vieth said.

“Net orders” include cancellations of previous orders, he said. For example, ACT reported in May that 8,894 new trailer orders were received in July 2008, but about 3,000 subsequently were canceled.

“We’re better off than we were six months ago, but the first six months of this year were horrible,” Vieth said. “So, even though the situation is better, it’s still bad.”

“Generally, the market is still soft,” Chris Hammond, vice president of dealer sales at Great Dane Trailers, told TT. “Dry vans and flats are still weak, and only refrigerated units have held up,” Hammond said.

He said Great Dane, Savannah, Ga., was receiving a lot of conflicting data about the industry.

“We have seen a little bump in orders, however,” he said. “Part of the bump we’re seeing is coming from the refrigerated units, which have remained strong because people have to eat.”

Craig Bennett, senior vice president, sales and marketing for Utility Trailer Manufacturing Co., City of Industry, Calif., was pessimistic. Utility says it is the third-largest trailer manufacturer in the United States.

“There is some business going on, but it’s hard to take one month and make a big deal about it,” Bennett told TT. “When you start with a real low base, one month’s increase doesn’t say much — and one month doesn’t make a trend.”

He said that trailer sales have been sporadic this year, “some months up, some months down.”

“You string three or four months together, then you have a trend, but the economic data on housing and the economy are still so weak — and look at [North American Free Trade Agreement] freight, off 31% in June from the same month last year. That’s huge.”

Mickey Long, general manager of TMI Trailers, a new trailer dealer in Florence, S.C., was similarly pessimistic.

“I don’t see where there is any increase in orders by 4%, because we haven’t seen it in this area,” Long told TT. “In fact, July and August have been the lowest two months in two years. The only thing we’ve sold recently are used trailers. We had a few orders for new trailers, but that was all.”

Polk Commercial Vehicle Solutions, which tracks registrations for transportation data, released its new commercial trailer registration data for the second quarter in August, showing a deep decline from 2008.

Polk, Southfield, Mich., said 17,606 trailers were registered in the second quarter this year, down from 42,633 in the same period last year. Polk has not yet received July data.

“Commercial trailers are down greater than the overall trucking industry for the year, down 60%, while the business is down only 40%,” Gary Meteer, Polk’s senior account director, commercial and aftermarket solutions, told TT.

“People tell me there are sufficient trailers in the marketplace, so that if demand arises, people don’t have to go out and buy new ones,” he said.

Meteer said that 1.9 million new trailers were registered over the past 10 years, and given their long life, he accepted the industry figures of about 3 million trailers for the total available for use today.

He said that with such overcapacity, businesses were using them “for storage and all kinds of nontraditional uses.”