Capacity shortage looms large

Rate hikes about to kick in, FTR says

Truckload capacity shortages will gather momentum this year and continue through 2013 as the economy recovers and regulatory restrictions limit the driver pool, an FTR Associates economist said. Because of the economic upturn and the federal government’s push for improved safety, “a couple hundred thousand drivers will be taken out of the marketplace between now and the end of next year,” said FTR senior consultant Noel Perry, who acknowledged that forecast shortages have been slow to occur and now likely will hit the market in 2012.

Truckload capacity shortages will gather momentum this year and continue through 2013 as the economy recovers and regulatory restrictions limit the driver pool, an FTR Associates economist said.

Perry said trucking is typically slow to respond to an economic recovery, and that if the market doesn’t respond by ordering more equipment to improve productivity, “There will be a bunch of loads that don’t get delivered. That means there will be supply chain failures,” although he does expect the industry to meet the challenge.

Perry said truckload rate increases haven’t yet materialized as anticipated because the industry achieved productivity gains last year that enabled companies to absorb additional freight without adding equipment and drivers. That period has passed, and the market has tightened.

“We expect the rest of the year to have relatively strong truck shortages to include price increases,” he said. Perry predicted that prices will continue to rise through next year and into 2013 even as trucking capacity catches up with demand. Perry added that truck tonnage will average 5 percent growth this year through 2013.

Preliminary FTR data shows March Class 8 truck net orders for all major North American OEMs totaled 28,871, a 20 percent increase over February preliminary orders and a 155 percent increase over the same period in 2010. FTR said the March results – which include the United States, Canada, Mexico and exports – are a continuation of the strong trend from previous months.

FTR recently increased its 2011 projections for Class 8 truck sales and said that the strong order activity in March supported that decision. Perry said the current strong new truck orders primarily are to replace aging equipment and are not adding to capacity. However, he said if his forecast of higher rates is accurate, he anticipates a “considerable expansion by the industry in 2012 and 2013.”

Perry predicts 3.5 percent gross domestic product growth this year. He said the continuing decline in homeownership will have a negative impact on the overall economy and trucking. High oil costs also are felt by businesses, but they “won’t kill the economy,” Perry said. The wild card is if political unrest in the Middle East spreads to Saudi Arabia. “That will be a big deal,” he said. – Max Kvidera

IN BRIEF

* The Federal Motor Carrier Safety Administration granted a two-year exemption to the Flatbed Carrier Safety Group to secure metal coils grouped in rows with eyes crosswise and the coils in contact with each other in the longitudinal direction. For more information, go to www.regulations.gov; the docket number is No. FMCSA-2010-0177.

* Legislation that would allow states to raise interstate weight limits up to 97,000 pounds has been reintroduced in the U.S. Senate. The higher limit would apply only to vehicles equipped with six axles instead of the typical five. The House version of The Safe and Efficient Transportation Act (S. 747), H.R. 763, was reintroduced in February.

* The U.S. Department of Transportation’s Maritime Administration released “America’s Marine Highways,” a report requested by Congress to help determine if water transportation can help move the nation to a more environmentally-sustainable transportation system, reduce highway congestion and cut down on road and bridge maintenance and replacement costs.

* Integrated Freight Corp. acquired Cross Creek Trucking, a Medford, Ore.-based refrigerated freight hauler with 2010 revenues of about $28 million. The acquisition will increase Integrated Freight’s nationwide fleet to more than 300 tractors and 650 trailers and expand the Sarasota, Fla.-based company’s shipping reach into the Pacific Northwest.