Commercial development projects with longer lead times are still keeping some truck operators busy. Even that sector is slowing down and is projected to weaken considerably in 2009 in most U.S. markets.
This fall, instead of hauling lumber to home improvement stores and housing sites in the Pacific Northwest, owner-operator Dave Bicheno of White Swan, Wash., transported fresh pears six days a week to a cannery in Oregon. Transporting pears paid well – better than 2x4s – but by the season’s end in November, he had planned to go back to delivering building materials, which is down by 50 percent this year.
Tulsa-based Melton Truck Lines runs 1,000 tractors and more than 1,750 flatbed trailers, primarily carrying industrial products like raw steel and machinery. Over the past two years, the company’s tractor productivity dropped 10 percent, says Russ Elliott, a senior vice president. “In 2001 and 2002, there was a decrease, but we’ve never faced a sustained period when we’ve had two 5 percent drops,” he says. “We’re definitely in a longer and more painful trend than we’ve ever been in.”
The construction-led freight slowdown in North America, heading into its third year, is hurting owner-operators and carriers alike. Now that the sharp slump in homebuilding in recent years has triggered the credit crisis and accompanying recession, truck transportation likely will decline up to 2 percent in 2009, the worst performance since 1982, says Noel Perry of FTR Associates, a transportation consulting firm. The result of three years of declining Class 8 truck loadings and two years of lower Class 8 ton-miles “puts strong pressure on the carrier base,” he says.
Freight volumes overall are decelerating, but it’s a mixed bag for different freight segments, says Bob Costello, chief economist for the American Trucking Associations. While dry van shipments are contracting year over year, tankers are benefiting from the popularity of biofuels and hazmat shipments turned down by railroads, he says. Flatbed carriers are seeing many fewer building material loads, although metal products and heavy construction shipments have taken up the slack, carriers say.
“It’s a continuation of what we’ve seen the past two years,” says Todd Spencer, executive vice president of the Owner Operator Independent Drivers Association. “We won’t see any improvement until we see an improvement in the overall economy. A lot of that hinges on when the housing industry not just rebounds but ceases to deteriorate.”
For those who’ve relied on transporting building materials, the news isn’t bright. The U.S. Commerce Department reported that housing starts are at the lowest level since 1991. Adjusted for population growth, the housing start figure is actually the lowest since the government began tracking starts in 1959.
The manufactured housing outlook is bleak, too. The industry went through its own bubble about five years ago when buyers who shouldn’t have been financed got loans anyway. Foreclosures followed.
“When the credit crisis got worse and no one was lending to anybody, it just compounded our problem,” says Chris Barrett, executive vice president at Bennett Truck Transport of McDonough, Ga. “I think our housing segment is likely to come back before other segments do, based on affordability and quality of construction. I’m optimistic we’ll get out of the woods before site-built gets going.”
Bennett calls on 950 trucks run by owner-operators to transport manufactured and modular housing and recreational vehicles. The company’s business was down 20 percent to 25 percent before the credit markets froze up and is off as much as 35 percent now, Barrett estimates.
“On the housing side, we’re at historic lows of units manufactured,” he says. “RVs are at a 16-year low.” Barrett says winter business normally slows 50 percent from the summer peak, but this winter may be worse. “Next year, we project we’ll be off another 15 percent,” he says.
In retail, the normal fall boost that comes with holiday shipments isn’t happening this year. “We haven’t seen that materialize the past two years and, if anything, this year is worse than last year,” says OOIDA’s Spencer.