Preliminary orders for new trailers met expectations in October after a strong September suggested equipment deliveries in 2020 would keep manufacturers busy.
FTR Transportation Intelligence and ACT Research each said activity was the strongest since November 2018, reporting 31,800 and 31,900 orders respectively.
“Several large dry van fleets placed their big orders for 2020, showing they have confidence in the freight markets going into next year,” said Don Ake, FTR vice president of commercial vehicles. “Dry van orders were strong despite a lull in freight growth.”
Compared with the frenzy in the same month a year ago, orders were down 42%. Year-to-date, net orders are off 52% from the torrid pace of 2018. About 241,000 trailer orders have been placed over the last 12 months.
The ratio of trailers to tractors has risen from about 2.5:1 to 3.1:1 in recent years, Dustin Smith, senior vice president and group president of Commercial Trailer Products for Wabash National Corp., told FreightWaves. The average age of a dry van has fallen to about seven years from nine years a decade ago.
That helps explain why the trailer business has strengthened every year for the last decade while power units have seen a few down years in the same period. E-commerce-driven distribution patterns require more trailers for drop-and-hook operations that avoid dwell time for loading and unloading.
“We’ve seen a massive shift as everyone tries to optimize their operating models to accommodate e-commerce,” Smith said.
Backlogs are expected to climb for the first time in 10 months despite cancellations and retiming of orders.
“Some placeholder orders are likely being cleared from the system and it is also likely some production is being shifted into early 2020,” said Frank Maly, ACT director of commercial vehicle transportation analysis and research.
Vocational trailer markets, such as flatbeds and dump trucks, struggle as industrial production weakens.
“The trailer market is slowing, but a significant downturn is not imminent,” Ake said.
Wabash (NYSE: WBC), one of the three major trailer makers along with Hyundai Translead and Great Dane, produced 14,900 trailers in the July-to-September third quarter, CEO Brent Yeagy said on the company’s third-quarter earnings call Nov. 6.
“We produced a couple of hundred units more than we shipped,” Yeagy said, adding that inventory levels typically fall by the end of the year.
Yeagy said Wabash has hedged its $800 million backlog for the rest of 2019 and the first quarter of 2020. It began planning for lower volumes 18 months ago, adjusting production as needed. Additional changes can be managed by adding and dropping overtime hours.
Production at Great Dane’s nine U.S. manufacturing plants is sold out for the rest of the year, Rob Ulsh, vice president of dealer and international sales, told FreightWaves following the company’s press conference Oct. 27 at the North American Commercial Vehicles Show.