Loadlink reported strong load posting growth in August, buoyed in part by the short-lived rail strike and fears over supply chain disruptions. Spot market rates in the U.S. remained weak in the most recent week, as did trailer orders.
With trailer makers expected to soon open 2024 order books, analysts are watching closely to see if buyers will come back or instead direct limited cap-ex budgets to power units ahead of EPA27 emissions standards.
Trailer orders continue to underwhelm
Trailer orders in August came in at 6,661 units according to FTR, which was down 30% year over year, but a 17% improvement from July numbers. FTR indicated it was the fifth weakest order month in the past four years, while cancellations remained above 30% as a percentage of total gross orders for the fourth straight month.
FTR blames stagnant freight fundamentals for the lack of new orders and notes manufacturers have trimmed production to levels 30%, lower than the average August build rate.
“FTR believes that weakening trailer demand during 2024 to date indicates that in the near term, some fleets are likely prioritizing capital expenditures on new power units over investments in new trailer equipment, whether due to reduced profitability or shifting trade cycles,” reasoned Dan Moyer, FTR’s senior analyst, commercial vehicles.
“Higher-than-ideal trailer inventories at dealers across most segments, reduced trailer capital expenditures at fleets, and declining backlogs likely will exert downward pressure on build rates for the rest of 2024. As with the Class 8 market, order boards opening during September mean that 2025 order levels likely will start to dictate the extent and duration of further potential production cuts.”
ACT Research reported orders of 7,700 units, still down 40% year over year.
“This month’s data brings year-to-date 2024 U.S. trailer net orders to 89,400 units, a 27% contraction, compared to the first eight months of 2023,” said Jennifer McNealy, director of commercial vehicle market research and publications at ACT Research.
“Despite the sequential order improvement, August data continue to bear witness to our expectations of weaker demand against the backdrop of elevated order velocity the past few years, continuing weak for-hire truck market fundamentals, and already-filled dealer inventories. That said, it is important to remember that for orders, we remain in the weakest months of the annual cycle, suggesting stronger orders weren’t expected in August. An order uptick showcasing demand, or the lack thereof, depends on the next few months as OEMs open, or more fully open, their 2025 books.”
ACT anticipates fleet profitability will improve later this year, increasing their ability to purchase new equipment. But like FTR, ACT reported, “we continue to expect fleets’ willingness to spend will lean toward the purchase of new power units ahead of the EPA’s implementation of 2027 regulations.”
McNealy added, “Industry anecdotes suggest that the ‘pause button’ is expected to remain pressed through the remainder of 2024, and those on the frontlines are expressing concern about 2025, as well. The timing and size of 2025 order bookings is the wildcard. Additional indicators supporting the lack of optimism include still-elevated cancellations and backlogs lower than we’ve seen since late 2013. And despite positive momentum in the U.S. economy, lingering weak carrier profitability suggests little support for trailer orders to bolster backlogs into the end of 2024.”
Canadian spot market volumes surge
Loadlink reports that August showed a big spike in spot market load postings, in part due to the short-lived rail strike and fears of related supply chain disruptions.
Posted loads jumped 32% year over year in August, while equipment postings were down 20% against year-ago levels. Cross-border load growth led the way, accounting for 59% of all loads.
Inbound loads were mostly flat, while outbound cross-border loads jumped 54% from July levels. Domestic load postings grew 34% both month over month and year over year, Loadlink reported.
The truck-to-load ratio improved to 3.07, down from 4.06 in July, as equipment postings fell 3% month over month and 18% year over year.
“August 2024 was a very successful month for the Canadian freight industry due to record-breaking volumes and strong cross-border trade,” Loadlink noted. “We do expect to see a ramp up in the following months leading into the holiday season.”
Weakness in U.S. spot market
In the U.S., spot market rates declined as expected for the week ended Sept. 13, according to Truckstop and FTR Transportation Intelligence. All equipment types were affected by the drop in rates.
Historically, the week ended Sept. 20 sees continuing falling rates week over week for dry van and reefer haulers, but usually an increase for flatdeckers. All-in rates are trailing 2023 levels, but are healthier when factoring in the lower cost of diesel this year.
The Market Demand Index ticked up to 60.1, which is the highest level in six weeks.
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