Chart of the Week: ACT Research Equipment Orders – Class 8 SONAR: ORDERS.CL8
Class 8 truck orders remained unseasonably strong through the primary few months of 2024, outperforming last February by over 20%, in line with ACT Research. Freight-hauling semi trucks typically dominate this category and have been a very good indicator of industry health, but like many indicators, this value’s implications have modified.
Ask transportation service providers the state of the national freight market, and they’ll all say the identical thing: It’s awful. National truckload carriers are already tempering expectations for investors in Q1.
Long-term contract rates for dry van truckload freight proceed to deflate, showing over 7% lower 12 months over 12 months in early March. In other words, there could be very little reason to expect this category of truck orders to point out signs of strengthening.
ACT offers up just a few explanations, stating that personal fleet growth and a few level of increased vocational spending due to government spending on infrastructure and nearshoring efforts are propping up the order levels.
This is smart, seeing as how the domestic freight market has been fractured for the reason that pandemic began in 2020.
rejection rates by trailer type, the flatbed market (FOTRI) had a completely different trajectory from refrigerated (ROTRI) and dry van (VOTRI). Tender rejection rates for flatbed took some time to extend, peaking after refrigerated and van began to plummet.
This was largely attributable to the sort of freight being consumer goods. Flatbed freight skews toward industrial and construction activity, which was throttled by supply chain and production limitations in 2020-21.
The flatbed market has been healthier after the pandemic since it got less attention and fewer recent entrants during that period. Flatbed’s increasing national rejection rate supports the concept that heavy equipment is in higher demand around vocational efforts in addition to on this truckload segment.
The less-than-truckload market has also had a special experience from the broader trucking market, thanks partly to the failure last 12 months of the nation’s third-largest carrier, Yellow.
LTL contract rates (LCWT1) are likely to follow dry van truckload with a lag of six to nine months. Just as LTL contracts were showing signs of weakening last spring, the news broke around Yellow’s troubles with the Teamsters. This appeared to assist keep rates elevated as shippers scrambled to diversify their provider base away from the struggling carrier.
While the LTL space has not been completely inoculated against the general conditions of the trucking market, it definitely got a powerful buffer and was able to take care of more pricing discipline than truckload providers. Todd Maiden recently reported on ArcBest as a shining example of this effect.
Taking a sampling of publicly traded truckload carriers, most posted annual drops in average truck counts.
The 2 exceptions from this sample are related to acquisitions. Knight-Swift acquired U.S. Xpress, and Schneider acquired M&M Transport Services. Neither grew its fleet outside of consolidation.
Point being, the narrative that Class 8 order growth is a mixture of continued fleet replenishment and investment outside the for-hire truckload environment has strong support.
A greater indicator of industry health is the common used truck price, seen above for 3-year-old models (UT3) reported by ACT Research. Prices have plummeted behind the spot market collapse in 2022 and have been dropping since. This data point has its biases as well but seems higher suited than recent orders to elucidate the present market.
As has been the story with quite a few high-level traditional macroeconomic indicators, Class 8 order volume’s relationship with and skill to elucidate its environment has modified. Understanding value beyond traditional thought has grow to be increasingly necessary.
Concerning the Chart of the Week
The FreightWaves Chart of the Week is a chart selection from SONAR that gives an interesting data point to explain the state of the freight markets. A chart is chosen from hundreds of potential charts on SONAR to assist participants visualize the freight market in real time. Each week a Market Expert will post a chart, together with commentary, survive the front page. After that, the Chart of the Week will probably be archived on FreightWaves.com for future reference.
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