Is truck freight bottom close?

Is truck freight bottom close?

Freight tonnage fell again in April, according to numbers released by the American Trucking Assns. (ATA), indicating that trucking companies are still facing lean times

Freight tonnage fell again in April, according to numbers released by the American Trucking Assns. (ATA), indicating that trucking companies are still facing lean times.

The ATA said its seasonally adjusted for-hire truck tonnage index fell 2.2% in April, after plunging 4.5% percent in March. Compared with April 2008, tonnage contracted 13.2%, which was the worst year-over-year decrease of the current cycle and the largest drop in thirteen years, said Bob Costello, ATA chief economist.

“While most key economic indicators are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments,” he explained. “The absolute dollar value of inventories has fallen, but sales have decreased as much or more, which means that inventories are still too high for the current level of sales. Until this correction is complete, freight will be tough for motor carriers.” Costello added that truck freight has yet to hit bottom and it could be a few more months before this occurs.

However, Eric Starks, president of research firm FTR Associates, pointed out that while the freight market might not have bottomed out as of yet, it’s very close to doing so. “We still think we’ll reach that bottom around the middle of summer,” he told FleetOwner. “Most of the ‘pain’ is now out of the system, so it’s very unlikely we’ll see huge drops in freight tonnage going forward – though we may still see some small ‘tweaking’ in the [tonnage] numbers until we reach the bottom.”

The “million dollar question” from Stark’s perspective is how long the freight market will stay at the bottom. “Even once we reach the bottom, [trucking companies] are not out of the woods. We could sit with some very depressed freight levels for some time,” he cautioned. “The concern becomes how long many carriers can last with depressed cash flows and other variables if there is no freight to haul.”

Starks added that rate cuts are still possible as a lot of excess trucking capacity still remains in the market. “The same [business] pressures on carriers from three or four months ago are still there – they are not going away,” he said.

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