Truckers see signs of uptick in demand

Freight buyers take note that capacity is tightening

By Dave Hannon -- Purchasing, 8/7/2008 2:14:00 PM

Trucking firms and market watchers are reporting the early signs of a rebound in demand, which could also mean trucking capacity tightening and rates increasing. Fourty-four percent of truckers polled in a recent survey conducted by Longbow Research said they expect “a positive improvement in their business” for the rest of this year, a dramatic step up from just 15% of truckers that were optimistic in June.

On the flip side, only 19% of truckers expect the trucking market to get worse, compared with about 70% two months ago, according to the Associated Press. Longbow analyst Lee Klaskow said he expects capacity in the trucking market to continue to tighten, which will likely push rates up.

The American Trucking Associations reported a 1.3% month over month rise in truck tonnage in June and a 5.4% rise year-over-year, the eighth consecutive monthly year-over-year increase. ATA Chief Economist Bob Costello said trucking capacity has tightened significantly in recent months as high fuel prices continue to take some carriers out of the market. At the same time, carriers have reduced fleet sizes.

Bill Zollars, CEO of YRC Worldwide, told Reuters recently that he thinks the U.S. economy will begin to recover in 2009, saying "It looks like we are bottoming out. Luckily, this recession does not appear to be as severe as previous downturns.

In a recent interview with CNBC, Zollars expanded on those thoughts, saying, “We have some year over year closing of the gap in terms of number of shipments and we also see shipment size is starting to go up, which is usually an indicator that demand is coming back. I think there are some signs that demand is starting to stabilize and may be ready to start coming back.”

Analyst Ed Wolfe of Wolfe Research reported recently that at least one truckload carrier he spoke with recently negotiated a 7% base rate increase in a negotiation, “much to his surprise” but another trucker expressed concern that the apparent strength in freight demand of late was possibly no more than “fool’s gold” driven by reflecting tax rebate stimulus benefits which will likely abate in the second half.