Seven Oaks


Sponsored By:

   The Nation  |  Business  |  Equipment  |  Features


Capacity growth among carriers remains flat, TCP says

The very modest optimism regarding rate and volume expectations continues to influence whether carriers will add capacity, and, if so, to what degree, TCP officials said.

The Trucker News Services

7/26/2013

WINDSOR, Colo. — Capacity growth among carriers is remaining flat, Transport Capital Partners said Thursday.

TCP said a survey reveals two-thirds of carriers were planning to add capacity, nearly identical to the numbers for the first quarter 2013 and second quarter 2012,

In the second-quarter survey, 65 percent of carriers indicated they plan to increase capacity, presenting no notable change from first-quarter 2013 and second-quarter 2012 percentages.

Carriers also remain conservative in their estimates for how much capacity they will add. Over three-quarters of carriers plan to add little (1-5 percent) or no capacity in the coming 12 months – very little change, again, from first-quarter 2013 and second-quarter 2012 numbers. Only 24 percent of carriers planned capacity increases of more than 5 percent.

The very modest optimism regarding rate and volume expectations continues to influence whether carriers will add capacity, and, if so, to what degree, TCP officials said.

“Carriers continue to voice concerns about the ‘headwinds’ impacting operations and returns, but aging fleets and still relatively low interest rates are clearly offsetting factors,” Richard Mikes, a TCP partner, said.

Larger carriers are more cautious than smaller carriers in their buying plans. Just 19% of larger carriers plan to add more than 5 percent capacity. Among smaller carriers, 36% intend such capacity increases.

The most commonly reported method for adding future capacity is through company equipment that is either financed or purchased on a TRAC Lease. Thirty-four percent of carriers indicated this as their most likely option.

“TRAC leasing rates are lower as lessors pass through the benefits of accelerated depreciation, with carriers giving these tax breaks to lessors (banks and leasing companies) for such rates — attractive particularly when carriers may not have enough profits to utilize them,” Steven Dutro, TCP partner, said.

Over the past three years, the percentage of carriers intending to add capacity through the use of independent contractors has decreased by 50 percent, from 30 percent to 15 percent. Smaller companies are more likely than larger carriers to still seek out independent contractors (21 percent vs. 13 percent).

“Contractors left the industry as their profits and cash flows were depressed in the recession, and many are not interested in returning, even as more carriers offer lease purchase plans to attract them,” Mikes said.

 Just 8 percent of larger carriers intend to add capacity by buying an existing company’s fleet. Adding capacity through buying used trucks has declined from 8 percent in October 2011 to 0 percent today.

 “Used trucks with low miles are practically non-existent as carriers retain trucks rather than spending scarce cash for new trucks,” Dutro said.

The Trucker staff can be reached to comment on this article at editor@thetrucker.com.

Find more news and analysis from The Trucker, and share your thoughts, on Facebook.