Werner's Leathers Sees Trucking Demand Heating Up

Werner's Leathers Sees Trucking Demand Heating Up

PRINCETON, N.J. — Unseasonably cold weather may have dampened demand for outdoor merchandise from mowers to mulch earlier this spring, but that may change Memorial Day. 

As temperatures rise across the country, consumers will be moving outdoors and heading to stores. Supressed demand may translate to a rush to find trucks in late May, said Derek Leathers, Werner Enterprises' president and COO.

"Over Memorial Day, you're going to see (trucking) networks start tightening up," Leathers said May 16 at the ALK Transportation Technology Summit in Princeton, N.J.

Improved weather in late April already helped boost retail building materials sales 1.5 percent last month, according to data the Commerce Department released Monday.  

In mid-May, temperatures in Werner's home state of Nebraska rose above 100 degrees.

"You're seeing the beverage industry start to come to life, and chips and snacks are starting to move," he said. "The outdoor spring push is just starting to happen now."

The "equilibrium" in truck supply and demand that has prevailed for the past 18 months is starting to slip, Leathers said in the keynote address at the annual summit.

"It's becoming increasingly difficult to get trucks on the spot market," and it will become harder to find available capacity over the next few weeks, Leathers said. 

Although shippers aren't reporting great difficulty finding capacity, Leathers sees continued contraction in trucking capacity as inevitable, given the high cost of trucks and the low return on investment trucking companies see on new equipment.

The largest truckload operators are keeping a grip on capacity, with many carriers still reducing the number of trucks they operate in the face of sluggish economic growth. 

Leathers cited The Journal of Commerce Truckload Capacity Index, which dropped to 82.4 in the fourth quarter, its lowest point yet. The index measures capacity at a group of large truckload carriers with combined annual revenue of more than $10 billion.

And smaller carriers on which shippers frequently rely face a looming fiscal cliff. With new truck prices high and trucking margins thin, many carriers are delaying plans to replace aging trucks and spending more to keep those trucks running.

But repair costs rise as trucks age. "As trucks age, they enter into a death spiral," Leathers said. "Maintenance costs really skyrocket after you cross the 500,000-mile threshold. We're seeing more and more fleets quietly closing their doors as they get to that point." 

Shippers and truckers need to transfer more freight to intermodal rail, but "you could end up in a world where you simply can't grow intermodal fast enough to offset (contraction) on the trucking side," Leathers said.

Contact William B. Cassidy at wcassidy@joc.com and follow him at www.twitter.com/wbcassidy_joc.