Freight Demand Pushes Truck-Order Backlog to Near Record Level

Date: Thursday, May 10, 2018
Source: Wall Street Journal

Freight-hauling firms slowed their roll in ordering new trucks last month, as backlogs at equipment factories spiked following record demand for new vehicles in the first quarter.

The order backlog reached an estimated 205,000 units at the end of April, according to preliminary estimates released late Wednesday by transportation analysis firm ACT Research. The backlog has more than doubled since last September, when the order book sat at roughly 94,400 units, thanks to strong freight demand and a cash windfall for fleet owners under the new tax law.

ACT analyst Kenny Vieth said the backlog is the biggest since May 2006, during the strongest production year ever in the North American heavy-truck market.

North American fleets ordered a seasonally-adjusted 35,200 new heavy-duty trucks in April, according to ACT estimates. That was up 45% from the same month last year. But April orders declined from March, when fleets ordered a seasonally-adjusted 43,400 heavy-duty vehicles.

March was the third straight month of more than 40,000 orders for the Class 8 trucks, which haul goods on long-distance routes. Mr. Vieth said the slowdown from March to April was expected after such a strong first quarter.

“A lot of the orders that were going to be placed have been placed,” he said. “Seeing this slowdown or rationalization in orders doesn’t mean the industry is rolling over, but it reflects the fact that a lot of the heavy lifting on orders and backlog-building has been done.”

Mr. Vieth said the “backlog-to-build ratio” at the end of March was 7.2 months, meaning there will be plenty of work for manufacturers well into the fourth quarter of this year and likely beyond that. “This is a good problem to have,” he said.

Industry analyst group FTR said in a separate report Thursday that it estimated 34,700 orders for heavy-duty trucks in April, a 26% a decline from March. FTR said North American fleets have orders 368,000 Class 8 trucks in the past 12 months, however, increasing pressure on equipment manufacturers to ramp up production to keep up with the red-hot market.

Manufacturers of trucks and truck components say they are accelerating production, although some say the difficulty in recruiting workers and getting goods delivered that has hit much of the factory sector is also straining some of their operations.

Truck maker Paccar Inc. said it delivered a record 44,500 trucks in the first quarter, and plans to ramp up its production after reporting record quarterly pretax profits of $192 million in the first three months of the year.

“Demand is good, and we see no indications that demand is lessening,” Paccar Chief Executive Ronald Armstrong said on an April 24 conference call. “We’re planning to increase our build rates in the second quarter. And so it’s a very coordinated approach with our supply base to make sure that we can execute that. We don’t take the build rates up unless we feel confident in our ability to deliver.”

Freight capacity still has a long way to go to meet demand. DAT Solutions LLC, which matches available loads to trucks in the spot market, says shipments on its “load board” doubled from the same month a year ago while the number of trucks available increased only 7.5%.

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