May Trailer Orders Drop 19.7%; OEMs Say Backlogs Still Strong

New trailer orders fell 19.7% to 14,199 in May from a year earlier, ACT Research reported, but trailer manufacturers said backlogs remain strong and suggested that fleets soon will need to upgrade equipment.

The May total — the lowest since August — also was down 35.8% from a revised total of 22,114 for April, as the trailer market hit “the orders desert,” which typically extends through the summer, said ACT Vice President Steve Tam. He also said the industry backlog was 111,953 in May, up 9.1% from a year earlier.

“We’ve had exactly the same dynamic on the trailer side as we’ve had on the Class 8 [tractor] side, and that’s multiple years of below-replacement activity,” Tam said.

He said it is easier to extend the life of a trailer because the cost of maintenance does not increase as much as with a tractor.

Trailers are “the last thing to get any attention,” Tam said. “I guess it’s behind the power unit for a reason.”

Industrywide orders of dry vans, the largest trailer segment, fell 22.8% in May to 6,926 from a year ago, Tam said.

Bulk tank trailers had a “really rough month” in May, with a net order of minus 89 after cancellations outnumbered new orders, he said. Liquid tanks were stronger, though, with 718 new orders.

Utility Trailer Manufacturing Co., City of Industry, Calif., actually recorded a 35% year-over-year increase in new orders in May, said Craig Bennett, senior vice president of sales and marketing.

However, he said the industrywide orders downturn in May was “partially the seasonal cycle but also partially the fact that things have been pretty strong for some period of time and there’s a little bit of a correction going on.”

Bennett also said some buyers have had a “wait and see” attitude because of economic uncertainty, but he saw signs that confidence is growing during June.

At the same time, fleets’ equipment is getting older.

“Maintenance costs are going up, and it’s time to replace it,” Bennett said.

Fleets that are ordering new trailers are still mostly replacing existing equipment, Tam said.

“A lot of the builds are replacement units, which has been the trend for most of the year,” said Chris Hammond, vice president of dealer sales at Great Dane Trailers, Savannah, Ga.

He noted that Great Dane’s backlogs remain deep, with dry van orders extending into 2013 at most plants.

David Giesen, vice president of sales and marketing at Stoughton Trailers, Stoughton, Wis., said the industry’s overall trailer orders figure is “within a normal spectrum” and remains above 2008-09 numbers, “which were very, very low.”

Stoughton, whose backlogs grew in May, is currently filling orders for November production, and although there are “still more replacement orders than growth,” it was probably all replacement a few months ago, Giesen said.

Stoughton hasn’t yet seen a seasonal slowdown in orders, he said, but expects it to come.

“The summer months always end up with more production than intake in orders because things just slow down with vacations and everything else . . . but we aren’t seeing it yet,” Giesen said.

Polar Tank Trailer, a unit of Polar Corp., St. Cloud, Minn., said its dry bulk trailer orders dropped 90% in May from a year ago, but liquid tanks climbed 32%. Since March, dry bulk trailer orders were down 59%, while liquid tank trailers dipped 7%, the company said.

Nevertheless, the overall orders remain strong, and there remains a significant backlog, said Garrity Gerber, Polar’s marketing manager.

The boom in hydraulic fracturing, or fracking, especially in North Dakota, has produced a surge in demand for crude oil tanks, as well as dry bulk trailers used to haul sand used in the process, he said.

Polar’s sales of crude oil tanks and sand trailers skyrocketed 400% and 700%, respectively, from 2010 to 2011, with continued growth in 2012, the company said.

Gerber said that the year-over-year order increases may level out, but the market will sustain more trailers for a longer period of time.

“The consensus from people I’ve talked to is that there’s obviously a boom that may not be supportable long term, but the oil and fracking is not going away,” he said. “They have a relatively large supply that, for the most part, is not being exploited at moment.”

Companies may be shifting some of their resources from the dry bulk business to liquid tank trailers, said Kevin Sterling, senior vice president and equity analyst at BB&T Capital Markets.

“You’re not seeing much growth in the dry bulk to move sand,” he said. “Railcars move a lot of the sand.”

Meanwhile, there’s a lot of need for liquid tanks to move water in and out for fracking, and they’re also hauling oil, he said.

Heil Trailer International Co., Hyundai Translead, Vanguard National Trailer Corp. and Wabash National Corp. did not respond to requests for comment by deadline.