A surge in freight demand helped the for-hire U.S. trucking industry sustain its momentum in the last quarter of 2011, pushing up carrier tonnage, pricing and profit at some of the largest trucking companies as truckload and less-than-truckload capacity stabilized.
For-hire truck tonnage increased 6.4 percent in December from the previous month, according to the American Trucking Associations, after rising only 0.3 percent in November from October. Year-over-year, however, tonnage was up 5.7 percent in October, 6.1 percent in November and 10.4 percent in December, reflecting improvements in pre-holiday retail sales and U.S. manufacturing production and exports.
Truck capacity measured by tractor count shrank 1.1 percent year-over-year in the quarter at a group of six large truckload carriers tracked by The Journal of Commerce, slipping only 0.7 percent from the previous quarter. Tractor count at the $10.5 billion carrier group declined only 1.4 percent over the past two years, but was down 7.6 percent since the end of 2008 and the height of the recession.
That indicates capacity has reached a “rough equilibrium,” as trucking analysts say, with trucking companies holding moderate pricing power over shippers.
Interactive graphic: Trucking Dashboard
“At this point in time, there are enough trucks in place to handle the freight,” Gary Girotti, vice president of the transportation practice at Chainalytics, said during a March 1 Journal of Commerce Webcast on trucking contracts and pricing. “I don’t see us going back to 2003 or 2004, when getting trucks was a daily knife fight.”
However, the truckload carrier group’s capacity was 15.6 percent lower in the last quarter than at the end of 2006, in line with several industry estimates of a 15 to 20 percent reduction in capacity from 2007 through 2011.
Girotti and trucking analyst John G. Larkin forecast rate increases in the 3 to 5 percent range based on modest business growth in 2012. “The freight outlook for the next couple of months looks reasonably solid,” said Larkin, managing director for transportation research at Stifel Nicolaus.
Shippers increasingly use intermodal rail to restrain rising over-the-road transportation costs. The shift in tractor count at the trucking and intermodal divisions of J.B. Hunt Transport Services, the nation’s biggest intermodal trucker, demonstrates the rapid rise of intermodal as a medium- to long-haul transportation option. The tractor count at the company’s intermodal division nearly doubled over the past five years, while its over-the-road fleet plunged by half. Intermodal tractors overtook highway units at J.B. Hunt in 2010.