Strong demand and good prices for trucking services are expected to continue in 2006, according to Fitch Ratings.
The global rating agency, based in New York and London, said the economy has been slowed somewhat by higher energy costs, but truck transport should remain relatively strong in 2006.
The company expects real gross domestic product to grow by 2.8 percent next year, compared to 4.2 percent in 2004 and a forecast 3.6 percent in 2005.
Long-haul LTL volumes are stable, and regional LTL has continued to grow because of just-in-time inventory management, the company said. Raw materials shipments are expected to moderate, although truckers serving foreign-owned auto factories in the Southeast are forecast to experience some growth.
Fuel surcharges have become key in shipping prices, with surcharges accounting for more than 50 percent of some trucking firms’ unit revenue increases, the company said.
“As fuel surcharges have become a larger component of the pricing structure, shipping customers are paying more attention to the effect it is having on their overall shipping costs and will likely begin to more actively negotiate the surcharge along with the base rate,” said the Fitch report. “As a result, the distinction between base rates and surcharges may begin to blur.”
Although fuel costs and increased demand for CDL holders will affect expenses, trucking should see increases in profitability and operating cash flow, the company said. Some carriers are expected to buy trucks before the lower emissions requirements become effective in 2007, Fitch said.
Some trucking companies will have more cash flow than has been typical, Fitch said. This cash may be used for acquisitions, especially in the LTL sector, and the largest companies are expected to invest overseas, Fitch said.
Shippers Favor Fuel Surcharges Over Rate Hikes
Shippers are more likely to pay a higher fuel surcharge than a base rate increase in 2006, according to a third-quarter shipper survey.
Moreover, the fuel surcharges being paid to truckload carriers vary little with the size of the carrier, according to The Supply Chain Indicator, recently released by the investment firm Bear Stearns.
Although the first quarter of the year is traditionally slow, shippers surveyed stated they did not expect to push back on the fuel surcharge.
Truckload capacity remains tight but is more balanced than a year ago, while LTL capacity has stayed mostly balanced, Bear Stearns reported. Its survey, however, was conducted in early October, before the full impact of hurricanes Katrina and Rita.
Yield growth among both truckload and LTL carriers was slower compared to a year ago, Bear Stearns reported.
Government Revises Long-Range Fuel Price Projections
The U.S. Department of Energy’s updated long-term forecast predicts crude oil prices more than $20 per barrel higher and gasoline prices more than 50 cents per gallon higher than its previous forecast a year ago. Lower diesel prices are expected in the next six years, however.
The preliminary Annual Energy Outlook 2006, published Dec. 12 by the Energy Information Administration, predicts that crude oil prices will fall from current levels to about $47 per barrel (in 2004 dollars) in 2014, then rise to $54 per barrel in 2025 and $57 per barrel in 2030. The reason: Demand is outpacing supply.
“There is now demand in China, Asia and India, and the demand there is growing,” said Denton Cinquegrana, markets editor for the Oil Price Information Service. “This should keep oil prices relatively high, but like any other market there are boom-and-bust cycles, and right now we are in the middle of a tremendous boom cycle.”
Chris Lee of ProMiles suggested a grain of salt may be order. “I am skeptical at best on long-range forecasts because they can be affected by so many unknown factors,” he said.
The DOE estimate may indeed be exaggerated, Cinquegrana said. Oil prices could drop if more supplies are found or new technologies are invented that make it easier to pull hard-to-reach oil out of the ground. Price increases, too, will make some hard-to-reach oil more profitable and more likely to be extracted.
“In the long run, all of these things will pull the price of oil down,” Cinquegrana said.
The Annual Energy Outlook 2006 also predicts greater crude oil production and an increased demand for ethanol and biodiesel.
Truck Fatality Rate Hits All-Time Low
The rate of fatal accidents involving large trucks fell to an all-time low in 2004.
The 2004 rate was 1.96 fatal crashes per 100 million vehicle miles, according to the Federal Highway Administration. That’s the lowest rate since the U.S. Department of Transportation began tracking it in 1975.
The fatality rate decreased despite an increase in the total number of vehicles on the road. The FHWA reports almost 6.3 million more registered cars and trucks in 2004 than in 2003.
“The numbers show a dramatic and continuing improvement in U.S. highway safety within the trucking industry and among our professional drivers,” said Bill Graves, president and CEO of the American Trucking Associations.
Rural Road Deaths More Likely to Involve Trucks
Fatalities are more likely on rural roads than urban roads, and rural fatalities are more likely to involve trucks, according to a National Highway Traffic Safety Administration study.
The agency recently issued “Contrasting Rural and Urban Fatal Crashes: 1994-2003,” an update of a 1996 report.
Using Fatality Analysis Reporting System data, the researchers learned 42 percent more fatal crashes happen on rural roads than urban, despite an average of fewer vehicle miles traveled on country roads. Rural fatalities also have a greater likelihood of rollovers and multiple deaths.
In rural areas, large trucks were involved in 37 percent of fatal crashes, compared to only 30 percent in urban areas.
Light trucks, meanwhile, were involved in 10 percent of fatal crashes in rural areas, compared to only 6 percent in urban areas.
Detroit Diesel Offers Strong Warranties on Remanufactured Engines
Detroit Diesel offers an incentive to buyers of its remanufactured engines and components. “Better warranties,” says Jim Morrow, executive vice president of Detroit Diesel and president of Detroit Diesel Remanufacturing.
For example, he said, Reliabilt Series 60 engines are covered by a standard two-year/200,000 miles cost-to coast warranty. In addition, three-year/500,000 miles extended service coverage plans are available.
Many independent engine rebuilders are unable to provide nationwide warranty coverage, said Morrow.
“With our Reliabilt products customers enjoy the original equipment quality and peace-of-mind they’ve come to expect from Detroit Diesel Corporation,” said Morrow.
DDC says it totally remanufactures engines, returning them to the latest blueprint specifications and testing them to original equipment standards. “The typical rebuilt engine,” said Morrow, “is only repaired to the level of failure. That means any components beyond this level are left intact.
“In the short run, a rebuilt engine may seem like the less expensive route to take. But in general, a rebuild will require more downtime that a remanufactured swing engine,” said Morrow. “This means more time out of service.”
– John Latta
Pennsylvania Gets Tagged for Worst Roads
For the second consecutive year and the fifth time in a decade, truckers say Pennsylvania has the worst roads in the country, according to the annual Highway Report Card survey conducted by Overdrive, sister publication of Truckers News.
Among the chief complaints: the conditions of the Pennsylvania Turnpike, I-78 and I-80 and poor signage. Owner-operator Bernard Linkhauer said Keystone State highways “will beat and bang you around.” The Pittsburgh-area resident said repairs along the turnpike amount to a Band-Aid. “It looks good, and it lasts a little while, but then it’s back to square one.”
For the second year in a row, the Lone Star state shines with the best roads. Not all truckers agree, though. I-35 to San Antonio “will tear your equipment up,” said Texan Judy Selzer.
The Overdrive survey ranked not only roads, but also the drivers who travel them. Roughly two-thirds of respondents say road rage increased during the past year, with 36 percent calling the jump significant. The worst automobile drivers are in California, followed by Illinois and New York, respondents say.
On safety, survey participants reasserted findings from years past: California has the nation’s toughest truck inspections, while Alabama has the most lax. California is well known for its truck laws, including tough anti-idling penalties. Alabama, on the other hand, has experienced a shortage of state troopers for several years.
More than 37 percent of respondents placed California tops on inspections; Ohio came in second with 8 percent of participants calling it the toughest state.
Overdrive Highway Report Card 2005
4. Georgia, Ohio (tie)
5. Nevada, Virginia (tie)
1. I-10 Louisiana
2. I-44 Missouri
3. I-95 New York
1. I-75 Florida
2. I-40 Tennessee
3. I-10 Texas
Most Improved Highway
1. I-40 Arkansas
2. I-80 Pennsylvania
3. I-30 Arkansas
Worst Automobile Drivers
3. New York
FMCSA Denies Split Rest Bid for Teams
The Federal Motor Carrier Safety Administration rejected a Teamsters request that it reconsider its decision to eliminate most split rest in sleeper berths for team drivers.
Meanwhile, FMCSA has granted a request from the American Trucking Associations for a rulemaking to consider whether a driver who is part of a team could record a two-hour period sitting in the non-driving seat of the truck as off-duty time if it were taken in conjunction with a consecutive eight-hour sleeper-berth period.
The International Brotherhood of Teamsters filed a petition for reconsideration on FMCSA’s decision to treat team drivers the same as solo drivers in the Oct. 1 final rule, which requires that drivers spend at least eight hours in a sleeper berth if they want to use the sleeper berth to shorten the 10-hour consecutive rest requirement. In addition, another two-hour break would have to be taken during the work day, and that break doesn’t stop the clock on the 14-hour window for completing driving time.
“Although the sleeper-berth provisions of the 2005 rule will require most, if not all, team driver operations to revise their scheduling practices, the elimination of fragmented rest periods in the final rule ensures that drivers can obtain 7-8 hours of uninterrupted sleep during one sleeper-berth period,” FMCSA said in a letter to Teamsters General President James Hoffa. “This action provides drivers with a work/rest schedule that is more likely to prevent fatigue.”
A stronger than expected fall shipping season pushed the American Trucking Associations’ Truck Tonnage Index to its third consecutive increase in November. The index, which is seasonally adjusted, rose 1.9 percent (2.2 index points) in November to 116.4. The jump follows 0.3 percent gains in both September and October.
The First Annual Truckers’ Ball, a black-tie event, will begin at 6 p.m. on Feb. 18, at the Antique Automobile Museum in Hershey, Pa. The $50 admission fee will go to the Teddy Bear Education and Emergency Assistance Fund, which helps truck drivers and their dependents through financial crises. For more information, call (877) 234-6362 or visit www.truckersball.org. RSVP by Feb. 10 and reserve your tuxedo at a discounted price.
Florida motorists can now call 511 for current information on traffic, road construction, lane closures, severe weather and interstate and major highway travel time.That information, plus alternate travel routes, is also available at www.FL511.com A $10 million Federal Highway Administration grant helped fund the new service.
Eaton Gets Contract
Eaton Corp., the maker of VORAD collision warning systems, has been awarded a $6.7 million contract by the U.S. Department of Transportation. It is part of a $31.6 million program to develop technologies to help drivers avoid crashes. The Integrated Vehicle-Based Safety Systems Program Field Operational Test is a 4-year program that will bring Eaton together with AssistWare Technology, Honda Research and Development Americas, Kenworth, and Visteon to develop and test a new integrated crash warning system for passenger cars and commercial heavy-duty trucks.
America’s Traveling Truck Show
Randall-Reilly Publishing, the publisher of Truckers News, has launched America’s Traveling Truck Show, a road show that will visit 20 Petro Stopping Centers beginning in Los Angeles and ending in Weatherford, Texas, the week before The Great American Trucking Show in Dallas. ATTS will be located in the busy Petro truck parking lots and will feature truck makers, trucking companies, product and services providers, and entertainment.
International Truck and Engine Corp. announced in January that the official name of its new 2007 Class 8 tractor is “ProStar.” International will unveil ProStar to the public at the Mid-America Trucking Show in Louisville, Ky., in March. Shipments of the new truck to dealers will begin in the first quarter of 2007.
Sterling Truck plans to debut its new low cabover March 1-3 at the Work Truck Show in Atlanta. Class 3, 4 and 5 models will be on sale at Sterling dealerships in the spring. The vehicle has the necessary configurations for dry van, reefer and stake applications. Available with a 4.9-liter diesel engine, a six-speed automatic transmission and as many as five wheelbases to accommodate 12- to 20-foot bodies.