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ACT Research: Likelihood of heavy vehicle market recovery in 2020 tempered

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Act research: likelihood of heavy vehicle market recovery in 2020 tempered
ACT Research President and Senior Analyst Kenny Vieth said broadly, there are three components to the forecast cuts for 2020 and 2021: Supply, demand, and timing. (Courtesy: ACT RESEARCH)

COLUMBUS, Ind. —  According to ACT’s latest release of the North American Commercial Vehicle OUTLOOK, expectations for the Class 8 and trailer production volumes have been trimmed for 2020, and expectations of a recovery starting in 2021 have been tempered.

Meanwhile, ACT’s December installment of the ACT Freight Forecast, U.S. Rate and Volume OUTLOOK report covering the truckload, intermodal, LTL and last mile sectors came with this headline: “Freight forecast: Lowering truckload spot rate forecasts on freight demand; what could drive rates up in 2020?”

As for the tempered Class 8 outlook, ACT President and Senior Analyst Kenny Vieth pointed to three factors.

“Broadly, there are three components to the forecast cuts for 2020 and 2021: Supply, demand, and timing,” Vieth said. “Some, like overcapacity, have been on the radar for a long time. Others, like the growing weakness in manufacturing and the broader economy, have come on slowly and inexorably over several months. The past six months have been marked by a continued loss of traction in manufacturing. Despite the GM-impacted payroll increase in November, most recent evidence from the sector suggests that recovery is likely to come later, rather than sooner.”

The North American Commercial Vehicle OUTLOOK is a robust report that forecasts the future of the industry, looking at the next 1-5 years, with the objective of giving OEMs, Tier 1 and Tier 2 suppliers, and investment firms the information needed to plan accordingly for what is to come. The report provides a complete overview of the North American markets, as well as takes a deep dive into relevant, current market activity to highlight orders, production, and backlogs, shedding light on the forecast. Information included in this report covers forecasts and current market conditions for medium and heavy-duty trucks/tractors, and trailers, the macroeconomies of the US, Canada, and Mexico, publicly-traded carrier information, oil and fuel price impacts, freight and intermodal considerations, and regulatory environment impacts.

As for the freight forecast, Tim Denoyer, ACT Research’s vice president and senior analyst, said, “This is the largest year-over-year drop in container imports since the Great Recession, aside from holiday timing. While partly because of the comparison against pre-tariff inventory building last year, we see evidence that trade issues will continue to drag the freight cycle through the mud. We’ve been forecasting a lengthy freight recession, but October imports, down 8% year-over-year, and fourth quarter rail volumes, down 7% year-over-year, are missing low expectations. In addition to a turn for the worse in our Spot Leading Indicator, this led us to modestly lower our spot rate forecasts for the first half of 2020.”

ACT Research also lowered Class 8 tractor sales forecasts today, supporting the beginning of the bottoming process for truckload rates, and this month’s report provides analysis of the factors that could pull forward the eventual rate recovery, from both a spot and a contract perspective.

“We expect capacity to rebalance over the course of 2020, but we caution not to jump to the conclusion that capacity is tightening because of carrier failures,” Denover said. “While our thoughts go out to the affected employees, even the largest bankruptcy in truckload history this week accounts for just 0.2% of the active fleet, or about 3% of the Class 8 tractor capacity that was added over the past year, and the equipment will be remarketed.”

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Georgia seaports set new record cargo volumes in 2019

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Georgia seaports set new record cargo volumes in 2019
Georgia's seaports are reporting record cargo volumes that moved across their docks in the 2019 calendar year. (Courtesy: Georgia Port Authority)

SAVANNAH, Ga. — The amount of cargo moving through Georgia’s seaports reached record levels in the past year, in part because of continued growth fueled by larger ships traversing the expanded Panama Canal, the Georgia Ports Authority’s top executive said Jan. 28.

The state-operated ports in Savannah and Brunswick handled a total of 38.5 million tons of imports and exports in calendar 2019, the agency reported. That’s an increase of 4.3% compared to last year.

The number of cargo containers, large metal boxes used to ship goods from consumer electronics to frozen chickens, moving across the docks at the Port of Savannah also reached record highs last year. The port handled 4.6 million container units through December, up 5.6% from 2018.

Griff Lynch, the port authority’s executive director, attributed much of the 2019 growth to the expansion of the Panama Canal that opened nearly four years ago. He said shippers are still increasing the size of the vessels using the route, funneling more cargo to the East Coast.

“On the container side, I think it still comes down to the expansion of the canal,” Lynch said. “We’re still enjoying the fruits of that.”

Savannah is the fourth-busiest U.S. port for shipping containerized cargo, behind only the Port of New York and New Jersey, and the ports of Los Angeles and Long Beach, California.

The Army Corps of Engineers is overseeing a $973 million deepening of the shipping channel that connects Savannah’s port to the Atlantic Ocean to make room for the larger ships. Work on the projects second half began in September and is expected to be complete by the end of 2021.

A boost in automobile exports also helped to grow Georgia’s cargo volumes last year. GM and Volvo began exporting vehicles through Savannah last year, with Volvo also shipping cars through Brunswick. Overall, the ports moved more than 657,000 cars, trucks and tractors, up 2 percent from 2018.

Lynch said tariff increases last year during the U.S. trade war with China likely slowed the Georgia ports’ 2019 growth.

Now he expects Georgia to benefit after President Donald Trump signed the first part of a new U.S.-China trade agreement in which China has pledged to buy more U.S. agricultural products.

“We think that’s going to be a big deal for us,” Lynch said. “We’re already seeing it. Poultry is starting to move again, and that has been flat for several years.”

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ATA Truck Tonnage Index increased 3.3% in 2019

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Ata truck tonnage index increased 3.3% in 2019
After falling 3.4% in November 2019, the Truck Tonnage Index recovered in December, posting a 4% monthly increase. (courtesy: ATA)

ARLINGTON, Vir. — American Trucking Associations’ advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 3.3% in 2019, about half the annual gain in 2018 (6.7%). The increase was the tenth consecutive year in which the tonnage index has risen above the previous year.
The advanced SA For-Hire Truck Tonnage Index rose 4% in December after falling 3.4% in November. In December, the index equaled 118.2 (2015=100) compared with 113.6 in November.
“Last year was not a terrible year for for-hire truck tonnage, and despite the increase at the end of the year, 2019 was very uneven for the industry,” said ATA Chief Economist Bob Costello. “The overall annual gain masks the very choppy freight environment throughout the year, which made the market feel worse for many fleets. In December, strong housing starts helped advance the index forward.” It is important to note that ATA’s tonnage data is dominated by contract freight.
November’s reading was revised down slightly compared with the December 2019 data. In December 2018, the SA index rose 3%, which was preceded by a 2% year-over-year drop in November.
The not seasonally adjusted index, which represents the change in tonnage hauled by the fleets before seasonal adjustment, equaled 112.7 in December, 2% below the November level (115.1). In calculating the index, 100 represents the index from 2015.
Trucking serves as a barometer of the U.S. economy, representing 70.2% of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods. Trucks hauled 10.77 billion tons of freight in 2017. Motor carriers collected $700.1 billion, or 79.3% of total revenue earned by all transport modes.

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ACT Research For-Hire Trucking Index: Rates slip amid strong holiday freight

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Act research for-hire trucking index: rates slip amid strong holiday freight
For-hire index rates slip, but signs of freight recovery in 2020 "encouraging" (©2020 FOTOSEARCH)

COLUMBUS, Ind. – The latest release of ACT’s For-Hire Trucking Index showed improvement in for-hire freight volumes and utilization. The data used in the Index included December. Respectively, the data indicated 55.5 and 52.3 diffusion index readings, both up four points from November on a seasonally adjusted basis. But even as for-hire capacity contracted again, the Freight Rates Index slid to 48.7 in December.
The ACT For-Hire Trucking Index is a monthly survey of for-hire trucking service providers. ACT Research converts responses into diffusion indexes, where the neutral or flat level is 50.
Tim Denoyer, ACT Research’s Vice President and Senior Analyst commented, “We see encouraging signs that the freight downturn is in its late stages and the market will rebalance in 2020. However, the ongoing rate pressure, even as volumes ramped into the holidays, is symptomatic of ongoing excess industry capacity. Our survey respondents clearly get it, and reduced capacity for a sixth straight month, so we can pretty easily deduce that private fleet capacity additions through year-end 2019 are the main factor continuing to pressure for-hire rates.”
The ACT Freight Forecast provides forecasts for the direction of truck volumes and contract rates quarterly through 2020, with three years of annual forecasts for the truckload, less-than-truckload and intermodal segments of the transportation industry. For the truckload spot market, the report provides forecasts for the next twelve months.
In 2019, the average accuracy of ACT’s truckload spot rate forecasts was 98%. The ACT Research Freight Forecast uses equipment capacity modeling and the firm’s economics expertise to provide anticipated freight rates, helping businesses in transportation and logistics management plan with confidence.

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