TCP: Carriers to hold back on adding capacity

Carriers appear to be approaching very cautiously whether or not to add capacity as 2012 gets under way. The Transport Capital Partners (TCP) Q4 2011 Business Expectations Survey found motor carriers hesitant to add capacity as returns were viewed as inadequate by over half the respondents. What’s more, the total number of carriers that expect to add 0-5% capacity has remained steady at 73% for the last two quarters

Carriers appear to be approaching very cautiously whether or not to add capacity as 2012 gets under way. The Transport Capital Partners (TCP) Q4 2011 Business Expectations Survey found motor carriers hesitant to add capacity as returns were viewed as inadequate by over half the respondents. What’s more, the total number of carriers that expect to add 0-5% capacity has remained steady at 73% for the last two quarters.

“Carriers tell us that rates are not covering investment risks nor are they close to covering the cost of the record prices of new trucks,” said Richard Mikes, TCP partner & survey leader.

According to Mikes, for the last two quarters, over half of the carriers have reported “inadequate reward from their investment to be able to grow their fleets dramatically.” For six quarters in a row they have given relatively the same desires in how they expand - except for decreasing reliance on owner-operators.

“It will be some time before the specter of bankruptcies and repossessions from the past couple of years will be forgotten, and this will happen if, and only if, rates go up substantially,” emphasized TCP partner Lana Batts.

Almost three-fourths of the carriers surveyed expect credit to remain the same compared with 53% in the prior quarter. And only 22% expect credit to improve. That’s dramatically down from 44% last quarter. “Clearly, carriers are reacting to the moves by the Federal Reserve Board saying that interest rates will remain the same into 2013,” noted Mikes.

Both Mikes and Batts agreed that “with a low 2% GDP growth environment forecast for 2012 by most pundits, the 15 to 20% reduction in the truck fleet - by not buying new trucks over the recession - will not be replaced until carriers see a clear path ahead of higher rates to compensate for escalating costs and regulatory constraints of CSA and hours of service.”

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