Bad on top of bad: trucking bankruptcies continue, tonnage takes 4.5% plunge
Analyst Donald Broughton estimates that more than 5 percent of trucks need to be plucked off the road before prices will stabilize, and trucking companies can see business get better.
The Trucker News Services
4/27/2009
NEW YORK — Things are bad in the trucking industry, but they're not bad enough, an analyst said Monday, The Associated Press reported.
Donald Broughton, an analyst with Avondale Partners, said 480 trucking companies went out of business in the first quarter. While that seems like a big number, Broughton said that many more truckers still need to fail to improve demand for the remaining players.
Those companies held a total of less than 1 percent of the country's total trucking capacity.
"This rate remains dramatically below the level established through third quarter of 2008, and roughly half what it was in the first quarter last year," Broughton said.
And even the remaining truckers are idling less of their fleets. Less than one-third the number of trucks were turned off in the first three months of the year than in the same period a year ago. Broughton believes that lower fuel prices saved many companies from going under.
"This is not a rate sufficient to offset the dramatic drop in demand that started in the fall of 2008, nor is it enough to offer any hope that the weakness in pricing will soon be over," he said.
Some trucking companies have been forced to slash their prices because there are still too many trucks going after too little freight.
Broughton estimates that more than 5 percent of trucks need to be plucked off the road before prices will stabilize, and trucking companies can see business get better.
Meanwhile, the American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index fell 4.5 percent in March, marking the first month-to-month decrease of 2009.
The gains during the previous two months, which totaled 4.5 percent, were erased with March’s drop. (February’s increase was revised down to 1.5 percent.) In March, the SA tonnage index equaled just 101.4 (2000 = 100), which is its lowest level since March 2002. The fleets did report higher volumes than in February, as the not seasonally adjusted (NSA) index increased 10.2 percent, but that is well below the 15 to 20 percent range that NSA tonnage usually rises from February to March. In March, the NSA index equaled 104.7.
Compared with March 2008, tonnage contracted 12.2 percent, which was the second-worst year-over-year decrease of the current cycle. In December 2008, the largest year-over-year contraction, tonnage dropped 12.5 percent from a year earlier.
ATA Chief Economist Bob Costello said he wasn’t too surprised at March’s reading. “Many fleets were telling us during March that freight was getting a little better. The problem is that freight should be significantly better in March, which is why the seasonally adjusted index fell,” Costello said. “While the industry is desperate for some positive news, it is unfortunate that March’s data suggests the industry has not hit bottom just yet.”
Trucking serves as a barometer of the U.S. economy, representing nearly 69 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.
Trucks hauled 10.2 billion tons of freight in 2008. Motor carriers collected $660.3 billion, or 83.1 percent of total revenue earned by all transport modes.
ATA calculates the tonnage index based on surveys from its membership and has been doing so since the 1970s.
Kevin Jones of The Trucker may be reached to comment on this article at kevinj@thetrucker.com.