Preliminary orders for new trailers fell to the lowest level in nearly a decade in June as fleets try to figure out their real needs after placing record orders in 2018.
Net orders of 6,200 trailers were about half the total reported by ACT Research because cancellations swelled. Adjusting for seasonal factors brought volume to just over 7,000, said Frank Maly, ACT director of Commercial Vehicle Transportation Analysis and Research.
“Despite indications earlier this year that fleets were anxious to place orders for 2020, discussions now indicate that fleets may have shifted to an extremely conservative stance,” Maly said.
Trailer makers that opened order books in June found few takers, said Don Ake, vice president of commercial vehicles at FTR Transportation Intelligence, which pegged net orders in June at 5,500. New trailer orders typically are placed in October.
Both ACT’s and FTR’s reported preliminary orders in June were the lowest since September 2009.
“This goes back to last year when we had record trailer orders and the backlog was pumped way up,” Ake told FreightWaves. “It’s a matter of rearranging the backlog and figuring out what orders they need in the second half.”
The enthusiastic ordering in 2018 chased a hot freight market. As the economy cools, especially in manufacturing, fleets are jettisoning trailer orders faster than normal.
Distribution changes to accommodate last-mile delivery also fed into robust orders of trailers. The rise of new hub-and-spoke warehouses prompted some shippers to add drop-and-hook capacity to meet the one- and two-day delivery demands of e-commerce.
“Softer freight volumes combined with lower rates could well be generating a reassessment of 2020 investment plans,” Maly said.
Trailer production continues to set monthly records. June is on track to be the sixth-best month in history. The five other monthly records have occurred since August 2018. About 160,000 trailers are queued for assembly, 6,000 units more than this time in 2018.
With so few new orders and strong cancellations of existing bookings, both Ake and Maly expect production to slow in the fourth quarter and extend into 2020.
Orders of dry vans and refrigerated trailers that carry mostly consumer goods are likely to hold up through the current quarter. Projections call for lower second-half orders of flatbeds used to haul building materials and other oversized objects for housing and construction.
“There is a noticeable dropoff,” Ake said. The reasons include overstocked dealers, a softening manufacturing sector, slower housing growth and moderating oil production.
Flatbeds are a leading indicator of trucking industry health. Orders typically precede bookings for the trucks that haul them. Companies keep flatbeds in service longer to wait out uncertain times. That creates pent-up demand, which drives a peak-and-valley purchase cycle.
“Rolling into 2019, it was all systems go,” Ake said. “All factors were positive in getting new trailers.”