The decline comes as truckers point to excess capacity and dimming industrial shipping demand.
The Logistics Report notifies the Wall Street Journal that the market for heavy-duty trucks at the heart of the U.S. industrial sector is running out of road.
Orders for Class 8 trucks fell last month to their lowest level since 2010, transportation-equipment research groups said. The July figure is the weakest yet since a strong rebound in truck-buying in 2018 lost steam this year on faltering freight-market demand.
“There is going to be a significant decrease in production coming in the second half of the year carrying into 2020,” said Don Ake, vice president of commercial vehicles at transport research group FTR.
FTR, which tracks equipment purchases by freight transportation carriers, said Class B Truck orders in North America fell to 9,800 in July, down 82% from a year ago. Separately, ACT Research said it counted 10,200 orders last month, the fewest it has measured in a month since February 2010. Figures for both groups were preliminary, with final reports due later this month.
Truck orders typically bottom out in the summer, with large carriers placing the bulk of equipment orders in the fourth quarter. But the seasonal pattern was upended last year as trucking companies flush with cash from a surging freight market and gains from the federal tax cut placed record monthly orders of more than 52,000 units in July and August 2018, according to FTR.
Now transportation companies are wrestling with “a persistent oversupply of capacity,” Mark Rourke, chief executive of Green Bay, Wis.-based truckload carrier Schneider National Inc., said in an Aug. 1 earnings conference call.
DAT Solutions LLC, which matches available trucks to companies looking to move goods in trucking’s spot market, said its measure of capacity in that arena was up 22.6% in July from a year ago while demand was down 37.3%. Several trucking companies said in their second-quarter earnings reports that increases in contract rates also have pulled back since the start of the year.
Along with cancellations of orders, the pullback in truck purchases has reduced the backlog at factory lines by more than a third since it reached a multiyear high at the end of 2018.
“The industry backlog declined this quarter to below 200,000 units from its peak of over 300,000 eight months ago,” Tom Linebarger, chief executive of engine-maker Cummins Inc., said in a July 30 earnings call.
FTR now expects factory output of heavy-duty trucks to decline 22% next year to about 275,000 units, down from the 353,000 units forecast for 2019, Mr. Ake said.
“Certainly the pressure to get in line that there was last year does not exist this year,” said ACT Research President Kenny Vieth. “Ultimately, truckers have purchased too many trucks relative to the amount of freight expected in 2019.”
This supports our BDI post last week.
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