The trucking industry will begin to recover in the second half of 2010 and accelerate into “a pretty nice” 2011, Noel Perry, FTR Associates managing director and senior consultant, said today, Nov. 20.
In an online presentation covering freight for trucking and railroads, Perry forecast trucking freight growth of 2.8 percent in 2010 and 3 percent in each of the years 2012-2014. That performance depends on industrial production rebounding, he said.
“It’s slower growth than in past history, but relatively strong growth given the modest economics,” Perry said. He predicted it will take until June 2011 before the industry reaches equilibrium between trucking capacity and demand and capacity utilization moves above 80 percent again.
Rates will begin to recover in the first half of 2010, but the operating margins enjoyed in 2004 and 2005 won’t be achieved until 2012, Perry estimated. “It’s good news that we expect rates to recover next year, but nowhere near the levels people became accustomed to the last time,” he said.
“In short term things will bounce back,” Perry said. “If it does, we will get a little bump in 2010 and a major bump in growth in 2011. Late next year we will be growing very rapidly and 2011 will be a pretty nice year.”
Perry had a note of caution. Even if equilibrium returns and capacity utilization increases, freight won’t climb to the previous peak of 2006 until 2014, he said.
The FTR consultant said the current surplus of 300,000 trucks is the biggest in 30 years and will take a while to work down. Many of these trucks are financially distressed, but banks are reluctant to foreclose on them because there’s no market for them.
Perry said the industry would benefit from more fleet bankruptcies to reduce capacity. “In the future, these fleets will have absolutely no equity left in their tractors or cash in the bank,” he said. “When it comes time to expand, they will not have cash to expand and won’t have any assets to trade in on new equipment. The people replacing the equipment will have to come from the outside because people inside the industry will not have the equity.”