[Stay on top of transportation news: Get TTNews in your inbox.]
North American Class 8 orders in September rocketed to the highest point since late 2018 to surpass 31,000 and climb well beyond replacement levels, ACT Research reported.
Preliminary net orders reached 31,100, according to ACT, which will update the total once final data is available from original equipment manufacturers. That was the highest since 43,256 in October 2018. In the 2019 period, September orders were 12,692.
The annual Class 8 replacement level for North America is about 220,000 units, or about 19,000 to 20,000 orders a month.
Preliminary NA #Class8 net orders in September were 31,100 units, up 60% from August and a whopping 145% from an easy year-ago comparison.https://t.co/Y2LeLoayNA#truck #semitruck #trucking #transportation pic.twitter.com/EXPCzMtJRf— ACT Research (@actresearch) October 5, 2020
“My hunch is this is probably the large national guys coming in and doing their annual deal,” said ACT Research Vice President Steve Tam.
He said fleets were very encouraged to order by what is happening with rates and demand. “If our freight forecast is correct, they are going to experience some very solid levels of profitability for the remainder of this year and for next year as well.”
That will set up the next cycle of strong equipment purchases leading to oversupply, he said.
“I think there is a bit more risk of that happening this time, happening more quickly. The reason is the whole labor dynamic,” the shortage of drivers, he said, some of whom may soon be returning as unemployment benefits run out and no additional federal stimulus appears.
“Their trucks are still out there [parked]. So we don’t need to add as many trucks as it might appear we are going to,” he said.
Meanwhile, amid the pandemic, the consumer has shifted to spending more on goods and less for services. “That means it’s going on trucks,” Tam said, calling the situation a silver lining for Class 8 operations.
“We stick to a disciplined order schedule that is based off of managing our tractors by mileage,” said Eric Fuller, CEO of U.S. Xpress. “We do not react to the market in regard to our tractor orders. This year we are sticking to that same discipline.”
U.S. Xpress Enterprises ranks No. 24 on the Transport Topics Top 100 list of the largest for-hire carriers in North America.
In its most recent industry forecast, U.S. Xpress specifically called out diminishing truckload capacity and overwhelming load volumes.
“The increase in carrier bankruptcies and rising insurance premiums have hobbled smaller carriers,” Fuller said. “In such a fragmented industry, size really does matter. We’re seeing rising costs on the labor side, and larger trucking companies like U.S. Xpress have the size and scale to handle fluctuations in the market. This strong-demand market will likely lead to inflation on the cost side for shippers.”
FTR pegged preliminary orders at 32,000.
The disruption in the retail markets is driving the current environment, but that won’t persist for too long, said Jonathan Starks, chief intelligence officer at FTR. Once the retail side stabilizes, it will be manufacturing that needs to show strong growth in order to maintain the current state of the freight markets.
“But exports remain quite weak and signal that there is a significant lack of global demand. This puts downward pressure on manufacturing growth,” Starks added.
One trucking executive said new trucks ordered at the beginning of the year are arriving.
A Mack Anthem from Bowers Trucking & Logistics delivers a load of surgical gloves, masks and gowns in Oklahoma City after it arranged for delivery of PPE supplies from Malaysia. (Bowers Trucking & Logistics Inc.)
“We went with the 2020 Mack Anthem. Mack is a new brand for us,” said Garrett Bowers, president of Bowers Trucking & Logistics Inc. “It’s probably the nicest-spec’d truck that we have ever put together.” Mack is a brand of Volvo Group.
He ordered 25 for his fleet of 57 trucks that also includes Kenworth Truck Co. models. Kenworth is a unit of Paccar Inc.
“Mack is getting back into the over-the-road truck market,” Bowers said. “I think it’s really exciting.”
The Ponca City, Okla.-based company that was formed in the early 1960s ranks No. 40 on the Transport Topics list of the largest flatbed/heavy specialized carriers in North America.
Bowers liked, among other features, Mack’s push-button, dash-mounted controls for the automatic transmission, and the wave piston design that produces enough heat at idle to keep the exhaust temperatures where they need to be so the aftertreatment system works as it should when the truck is not moving.
Meanwhile, he expects the freight market “to sustain very healthfully” through the fourth quarter and first quarter of next year, adding it is important now to prioritize shipments “more than just keep up with demand or try to even create demand.”
In part, that has involved delivering supplies of PPE including surgical gloves, masks and gowns for the states of Texas, Oklahoma and Missouri, he said. “Not only arranging the ocean and air shipments, but the ground shipments back to the respective departments of health for distribution to hospitals.”
That work continues. About 30 containers of PPE supplies are on the water coming over from Malaysia that Bowers will warehouse in California and distribute.
Want more news? Listen to today's daily briefing: