Heavy-duty rig orders seen surpassing 40,000 units in December, FTR said

Preliminary net orders of heavy-duty rigs in December surpassed 40,000 units for the second consecutive month, only the third time in nearly nine years that net truck orders exceeded the 40,000-unit level in back-to-back months, consultancy FTR said today.

According to FTR, net orders—defined as orders minus cancellations—for North American rigs totaled 40,560 units in December. The November total was 45,795 units.

Class 8 orders have totaled 363,000 units over the past 12-month period, according to FTR data.

The records for back-to-back monthly orders were set in the January-March 2006 time period, according to FTR's records. The current two-month record is 97,033 units set in February and March of that year. That was followed by the January-February time frame, according to FTR. Coincidentally, that was the last period of strong industry growth before a freight recession took hold later that year. The freight recession, exacerbated by the broader economic downturn in 2007 to mid-2009, lasted for about seven years.

Don Ake, FTR's vice president of commercial vehicles, said in a statement that the back-to-back monthly gains are a "rare" occurrence and are mostly due to several very large fleets placing orders now for trucks to be built during 2015. The heavy order activity at this time is the result of fleets locking in production slots due to tight manufacturing capacity, Ake said.

"Confidence in the economy and positive factors in the trucking sector are motivating fleets to place orders very early in this cycle," Ake said. "Trucking capacity remains tight, and fleets continue to need more trucks." Orders may weaken at the start of 2015 because some fleets have half of their expected requirements for next year already in the current backlog, he added.

In the post-recession years, virtually all rig orders have been aimed at replacing aging equipment rather than adding to existing fleet sizes. This was due to sub-par demand for freight services and escalating equipment costs. Now, with demand picking up and rate increases sticking, carriers may have enough confidence to start positioning their fleets for growth. However, FTR said it doesn't have clear evidence that such a trend is actually taking hold.

Trailer activity is on a tear as well. U.S. trailer net orders in October hit 46,267 units, an all-time record high and shattering the old record by 9 percent, according to FTR data. Trailer orders have now totaled 327,000 in the past 12 months through October, FTR said.

Activity was much higher than expected as large fleets, including leasing companies, placed sizable orders for 2015, FTR said. Users were incented to order now due to expected tight production capacity at trailer manufacturers next year, FTR said.