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 an estimated 3.6 percent in 2005. Long-haul less-than-truckload 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 expected 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.