Market showing signs of repair, but we’re not there yet

NEW YORK — The trucking industry could have been on the fast track to recovery by now, but the price of diesel and gasoline has postponed any significant rebound to possibly 2009.

That was one many outlook messages from Kenny Vieth, partner, A.C.T. Research, who was speaking to investors and the media this week in a teleconference hosted by transport market division at Bear Stearns.

Vieth noted that during the six-week period from mid Feb. to the end of March, we saw a 70-cent increase in the price of a gallon of diesel fuel. “We thought diesel prices would go up to $4 a gallon, but we didn’t think it would happen in six weeks,” he said.

He said that the industry is starting to see demand side recovery, but “there is kind of a stealth supply side recovery for truckers. However, class 8 exports overseas is helping to tighten capacity in North America slightly.

“There is capacity leaving the market, which should allow profitability to recover, and once it recovers, getting those trucks offshore means you need more new trucks domestically,” he explained. “There were simply way too many trucks chasing way too little freight.”

Rising backlog and lower inventory could
be setting the stage for a rebound.

However, he continued by saying that a turnaround is forthcoming, although the timing is perhaps not what some in the industry were hoping for.

He said that by the end of 2009, the number of Class 8 vehicles on the road would be insufficient to haul the demand in freight. “Rising backlog and lower inventory is setting the stage for a rebound.”

As for another pre-buy next year, ahead of the tough 2010 EPA regulations, Vieth expects one, but he doesn’t think it will be as large as the one in 2006, despite the fact that there is no consensus among truckmakers whether to go with advanced EGR or Selective Catalytic Reduction (SCR) to meet the standard.

“…if you’re a short term trade cycle fleet and you bought a lot of trucks in 2004, 05, and 06 you’re going to see some cycling going on. I think the truckers will be coming back into the market.”

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