Strength in orders for new truck trailers fly in face of weak rig demand, tonnage softness

Net orders for commercial trailers in November rose 18 percent from October's results and increased 10 percent year-over-year, according to a leading consultancy—gains that have come despite weak demand for the tractors that pull them and the freight that fills them.

According to ACT Research Co., the November results for net orders—new orders minus cancellations—extends what has been a very strong 13-month period for the trailer industry. Six of the industry's 10 strongest order months ever have occurred since October 2014, Frank Maly, ACT's director-CV transportation analysis and research, said in a statement. The trailer industry is on pace to post one of the best years in its history in terms of orders and deliveries, he said.

Most of the activity is coming from large fleets, Maly said. The small to midsize fleet is on the sidelines, he said. Dry vans accounted for most of the net order growth, with orders up 47 percent and 33 percent, respectively, sequentially and year-over-year, he said.

In a phone interview, Maly said that a large portion of net order activity is coming from fleets looking to add trailers as opposed to replacing older equipment. The average age of the total U.S. trailer fleet, which includes dry-van, flatbed, and refrigerated equipment, is between 7 and 7.5 years, according to ACT and FTR, another consultancy.

The current order strength may also be due to fleets that didn't get the number of trailers they wanted this year because of large backlogs. Those fleets are lining up now to be better positioned for 2016 deliveries, Maly said in the phone interview.

Yet as trailer orders surge, new truck orders have been declining, leading Maly to wonder how long the growth in trailer orders can be sustained if rig growth doesn't revive soon. "Although the trailer market continues at a solid pace, the tractor market has registered a noticeable slowdown in orders, and considered in tandem, this disconnect is somewhat disconcerting," he said in the statement.

Two weeks ago, FTR reported that net orders for heavy-duty trucks in November fell 59 percent from year-ago levels, hitting their lowest point in three years. Net orders in November—normally a strong month—hit their worst November levels since 2009, according to the consultancy. Last month's results were well below expectations, FTR said, adding that it doesn't expect much near-term improvement

Today, the American Trucking Associations (ATA), which represents the largest for-hire motor carriers, said its seasonally adjusted tonnage index fell 0.9 percent from October's levels. October's tonnage results were revised downward by one-half to a gain of just 1.8 percent, ATA said. Compared with November 2014, the seasonally adjusted index increased 0.2 percent, the smallest year-over-year gain since February 2013, ATA said. Year-to-date through November, tonnage was up 2.7 percent compared with the first 11 months of 2014, the group said.

Bob Costello, ATA's chief economist, said truck tonnage activity has definitely decelerated, and a sustained elevation in inventories relative to sales is likely to keep a lid on shipping activity for the next few months. Businesses generally work off existing stock before placing new orders, which generally hurts demand for shipping services.