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While shipping remains negative, Class 8 orders stay elevated

Feb. 5, 2021
As shippers market conditions were further challenged with strong freight volumes and fuel costs continuing to rise, fleets grew in numbers to lead off 2021 in a positive direction.

FTR’s Shipping Conditions Index for November remained in deeply negative territory at -9.04 although improved from the October reading of -11.6. According to FTR, the slight improvement was primarily due to some stabilization in capacity utilization, but utilization and rates remained very elevated, a negative for shippers.

On the other side of the coin, Class 8 orders for January exceeded 40,000 units, totaling at 42,800 units.

“No matter which mode or region, freight rates continued to stay elevated as we finished off 2020 and moved into the new year. Demand may be leveling off, but we are still seeing truck volumes in the spot market that are double the five-year average,” said Jonathan Starks, chief intelligence officer at FTR.

Shippers market conditions were further challenged with strong freight volumes and fuel costs continuing to rise. The outlook for 2021 is better but still resulting in negative SCI readings through the year. “In the intermodal arena we are seeing that ports and other stakeholders were not able to use the holidays to catch up on congestion issues that have plagued some markets,” Starks added. “However, intermodal loadings are still well above prior year and the typical seasonal lull in Q1 may not appear this year.”

Starks stated that manufacturers in China are not expected to take the normal two-week shutdown for Chinese New Year activities, making the market expect higher import volumes.

“With the holiday not occurring until mid-February, the market typically would expect high import volumes in late February followed by a noted slowdown in activity for a few more weeks,” Starks explained. “This could make it more difficult for the ports to get ahead of the vessel delays and port congestion until mid-year.”

Freight growth remains vibrant and fleets are rushing to add capacity as fast as possible. OEMs and suppliers are trying to keep pace with the surging demand. Fleets continue to place orders out to the end of the year to acquire trucks as they become available.

“Currently there are shortages of raw materials and component parts, which will result in supply being unable to meet the demand of Class 8 trucks in the short-term,” commented Don Ake, vice president of commercial vehicles for FTR. “Class 8 suppliers are working diligently to ramp up production but are hindered by the pandemic and material shortages. In addition, imported parts deliveries are being delayed up to two weeks at the ports.”

According to FTR, January order activity was -18% m/m and +144% y/y. Orders for the previous twelve months now total 308,000. 

“The supply chain is struggling after the surge in demand following the economic restart. Now companies are having problems hiring back enough workers due to virus concerns and protocols,” Ake said. “Also, the steel plants took longer than expected to fire back up. Demand for Class 8 trucks is surging, but the supply chain is hindered.

“Our industry is very skilled and experienced in dealing with roadblocks. It will handle this situation better than other sectors,” Ake added. “However, this will limit first-quarter production and will probably run over into part of Q2. When the vaccine enables employment to increase and the other bottlenecks are removed, this will end up being a robust year for Class 8 sales.”

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