July 23, 2010

By Mark Friend

Trailer orders for Dry Vans recently have exploded as truckload providers and less than truckload carriers have began to realize an increase in profits coming from recently tightened capacity. The ACT Research Company suggested that orders for Commercial Dry Vans were upwards of more than than 102% in June of 2010 in a month which historically is a slow month for trailer purchases.

Many analysts think that capacity had hit bottom for truckload carriers and LTL carriers during February 2010. This come back in transportation and logistics has rocketed truck Van Trailer sales roughly 165% year to date for 2010. Reefer Trailers have not encountered the volatility that Dry Van Trailers had and Reefer truck trailers are up 5% this year to date over 2009.

The spike in trailer sales has certainly followed by the raise in spot market pricing and transportation profitability for all carriers. Many truckload carriers, ltl carriers, and owner operators have simply parked trucks and much of most of the equipment has been taken off of the highway and relocated over to rig parking lots. Capital expenses have been meager at best the last number of years so some analysts believe this most recent raise in equipment exhibits carrier profitability and fleet reinvestment.

While many transportation and logistics professionals are excited about the recent news, others remain skeptical of a long-term recovery for the trucking industry. Brad Hollister, Business Development Director for Freight Access, Inc. (http://www.freightaccess.com) commented that "A long term recovery may be difficult to sustain. The smaller carriers, owner operators, and other logistics professionals do not have access to available credit required to sustain a wide-spread recovery. These recent spike in equipment sales is a reflection of large companies not only running lean for so long, but much of this recent capital expenditure may be postponed equipment replacement which did not happen during the last 24 months."

Many trucking companies and owner operators have decided to park their fleet as availability of capacity neared its highs in the fourth quarter of 2009 and first quarter 2010.. With capacity tightening this equipment will undoubtedly find its way back onto the roads and highways so that capacity will yet again regain a market generated equillibrium. "Even though 2Q 2010 has been a welcomed surprise, there are still many risks to a long term recovery which does not have access to available small business capital," said Brad Hollister.

Hollister believes that a combination of newly purchased equipment and renewed dispatching of existing fleets will balance out the current opportunity which exists in the industry, in the upcoming months. Analysts should be cautious about seeing the large carriers purchasing equipment as a definitive sign of direction of industry recovery. Until the sentiment is shared across firms of all sizes, the market will have obstacles to overcome before a recover can be declared.

Freight Access, Inc. http://www.freightaccess.com is a Wisconsin Corporation. To contact Brad Hollister, Director of Business Development, call 312-450-3020 or bhollister@freightaccess.com.