Trucking company acquisitions in the third quarter inspired the biggest leap in The Journal of Commerce Truckload Capacity Index since the recession.
The index rose 4.7 percentage points to 86, its highest level since 2009, from a reading of 81.3 in the second quarter. The index, based on actual tractor counts at a $10 billion group of large carriers, was flat at 79.7 in the first two quarters of 2013.
The capacity index’s unusual jump last quarter largely reflects Swift Transportation’s acquisition of Central Refrigerated Transportation, which boosted the truck count at the largest truckload carrier by 2,097 tractors or 12.9 percent.
That 5.9 percent year-over-year increase in the index value brought the capacity yardstick back to levels it hadn’t seen since the first quarter of 2009 and demonstrated how larger truckload carriers, notably Roadrunner and Celadon Trucking, are growing by buying smaller companies.
Truckload capacity isn’t increasing much organically, as the tractor counts at other fleets included in the database show. Some companies added a marginal number of tractors, but others continued to cut back. With equipment prices high and drivers scarce, acquiring capacity is the quickest way to grow.
The quarterly index uses fleet capacity levels in the 2006 fourth quarter as its base value. From the first quarter of 2009 through the fourth quarter of 2012, the index dropped 6.2 percentage points, after falling 14.1 points in 2007 and 2008. The index climbed 6.3 points this year, driven by increasing demand and consolidation.
Year-to-date, the American Trucking Associations For-Hire Truck Tonnage Index is up 5.4 percent, and the September index reading was up 8.4 percent year-over-year, the largest annualized increase since December 2011, according to ATA.
“I continue to be pleasantly surprised on the strength of truck tonnage,” ATA Chief Economist Bob Costello said in a statement. “I attribute a part of tonnage’s robustness to the sectors of the economy that are growing fastest, like housing construction, auto production, and energy output.” That doesn’t mean that many more trucks are needed to haul additional freight, but many trucks are more fully or heavily loaded. “These industries produce heavier than average freight, which leads to faster growth in tonnage versus a load or shipment measure,” said Costello.
The largest truckload carriers are gradually replacing older equipment or already have fairly “young” tractor fleets. Most carriers are expanding only when and where they can get an adequate return on investment for the additional capacity.
Nearly two-thirds of the truckload carriers surveyed by Transport Capital Partners in the third quarter said they anticipate increasing capacity over the next 12 months, with 45 percent saying they expect to increase capacity up to 5 percent.
Only 15 percent of the companies surveyed expect to boost capacity by 6 to 10 percent, with smaller carriers being more conservative than larger competitors. “Tight credit remains a challenge for a lot of businesses, particularly for truckers,” said Steven Dutro, TCP Partner.