Trailer Orders Jump 59% in May as Backlogs Continue to Pile Up

This story appears in the July 5 print edition of Transport Topics.

New commercial trailer net orders jumped 59% in May from the same month last year, ACT Research Co. reported, adding that the market was “continuing a healthy rebound from a very weak 2009.”

ACT Research, Columbus, Ind., also said that order backlogs rose an additional 10% in May, the fifth consecutive month that ACT has backlogs increasing, despite what it says was an increase in production.

ACT Research released its “State of the Industry: U.S. Trailers” report on June 25. Trailer industry people agreed that the market for new trailers has strengthened this year.

“One thing that has been very positive since the beginning of the year is the increasing breadth of the recovery,” Kenny Vieth, senior analyst at ACT Research, told Transport Topics.

“In January, orders for tankers and reefers shot up; in February, dry vans picked up; in April, low bed trailers; and in May, we saw an improvement in flatbed orders,” Vieth said.

Companies ordered about 13,350 new trailers in May, up from 8,400 in May of 2009, he said.

Vieth added that orders through the first five months of 2010 were up 69% over the same period last year, although he did not release actual numbers.

Vieth also said that the May orders still were below the replacement rate.

“We think 15,000 or 16,000 trailers are being scrapped every month, so even though people are ordering new trailers at almost twice the rate of orders last year, they are still below rate of replacements,” he said. “The population of trailers is still contracting.”

Craig Bennett, senior vice president sales and marketing at Utility Trailer Manufacturing Co., in City of Industry, Calif., said he was optimistic about the market for the first time since the latest recession hit.

“Business is better overall, though one month might be up and another down,” Bennett told TT. “Trendwise, we think the industry will be up 25% to 30% this year.”

Bennett also said that 2009 was “horrible, so that while this year may be just OK, it will in fact be great, after what we went through last year.”

He said that he expected Utility to experience the same increase as he sees for the industry as a whole.

“We’re somewhere in that range, and it’s very encouraging,” Bennett said. “But it’s also challenging, because we’re trying to hire employees for our factories outside California to increase production, and it’s been difficult to find enough qualified people.”

Bennett said that dry van sales have been up strongly this year, while refrigerated units have  been growing only at a slow rate.

“I’ve heard that the flatbed industry is doing great, but we haven’t seen it in sales,” he said. “Flatbeds are the toughest of all of our markets.”

He said that another industry problem in the recovery was a shortage of financing.

“Restrictions on getting credit are still too tight, and that is one of the main impediments to selling as many trailers as people want to buy,” Bennett said.

Bill Tirrill, vice president of national account sales for Fleetco Inc., a trailer dealer in Nashville, Tenn., was also optimistic.

“We would say that we have seen a fairly significant increase in new orders but a lot more price quoting,” Tirrill told TT.

“We’re also seeing more and more of a backlog of orders, because many of the trailer manufacturers have downsized so much during the recession and now can’t meet demand.”

Tirrill said the problem of shortages extended beyond the trailer makers themselves.

“A lot of their suppliers also downsized, so that the manufacturers may have everything they need to assemble trailers except for a few key parts,” he said. “It’s going to be a six-month process before the manufacturers can ramp up production to meet demand.”

Tirrill said that the trucking companies are seeing freight demand expand beyond their capacity to carry it, which he said was the main reason for increased trailer demand.

“Our clients are telling us about capacity concerns,” he said. “They are getting freight orders starting in September that they are trying to solidify, but so many are telling us about a major capacity shortage out there.”

He said that Fleetco feels confident enough about the recovery that it is stocking trailers in its lot for the first time in two and a half years.

Jeff Sims, president of the Truck Trailer Manufacturers Association, a trade group representing the industry based in Alexandria, Va., said that his members have reported increasing demand.

“They are busier,” Sims told TT. “We have heard in general meetings that there are signs of life in the trailer manufacturing world, and some are rehiring.”

Sims was cautious about declaring a recovery.

“There are signs of a recovery, but how strong it is, that is a wait-and-see game,” Sims said.