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TN: Trailer Orders Slow, but Freight Conditions Improve

The trucking market continues to improve, with the Trucking Conditions Index returning to positive territory and one analyst declaring an approaching end to the persistent freight recession, reports Trucknews.com.

However, improving conditions aren’t sending fleets to trailer dealers, reports TN. The latest order numbers plummeted in June as fleets are expected to direct their capex to power units ahead of the costly EPA27 emissions rules.

Trailer orders continue to plummet, with June numbers 17% down from May at 4,788 units, according to FTR. That total is 71% off the monthly average over the last 12 months.

Cancellations as a share of gross orders remained above 30% and the backlog-to-build ratio fell to 5.6 months, the second lowest it’s been since 2020.

“The U.S. trailer market faces significant challenges, primarily due to the stagnant truck freight/rate environment,” explained Dan Moyer, senior analyst, commercial vehicles with FTR. “Additional near-term potential factors may limit the total trailer market’s growth potential/recovery, including high dealer inventory levels, elevated pricing on inventoried units, and falling used trailer values. The opening of 2025 order books later this year along with the beginning of a potential truck freight recovery may improve market conditions. Meanwhile, OEMs will need to manage production cautiously.”

ACT Research said this month’s data means there were 26,000 units ordered in the second quarter, a 14% contraction over Q2 2023. Year to date, trailer orders are down 24% from the same period last year.

“This year’s slower trailer orders are no surprise given the elevated order velocity of the past few years, and with continuing weak for-hire truck market fundamentals, and already-filled dealer inventories, it looks like trailer demand is likely to remain constrained for some time,” said Jennifer McNealy, director – commercial vehicle market research and publications with ACT.  “That said, it is important to remember that for orders, we are now in the weakest months of the annual cycle, minimally suggesting there is no catalyst for stronger orders before the fall and the OEMs’ opening of their 2025 order books.”

She noted fleet profitability is expected to improve later this year, but that capital will most likely be directed toward the purchase of power units in advance of costly EPA27 emissions standards.

She added: “Industry anecdotes suggest that the ‘pause button’ is expected to remain pressed through the remainder of 2024. The industry’s largest segments remain under pressure, cancellations remain elevated as dealers and fleets recalibrate their needs, and external forces like the US presidential election, low used equipment prices, and high interest rates add to uncertainly into the near- and medium-term.”

However, falling diesel prices and an improving rate environment saw trucking conditions return to positive territory in May, according to FTR’s Trucking Conditions Index (TCI).

But FTR cautions the month is likely to be an outlier and it anticipates the index will return to negative territory through the remainder of the year.

“Trucking is in the initial stages of a recovery, although it might be months before market participants perceive much change,” said Avery Vise, FTR’s vice-president of trucking.

“A big piece of May’s positive TCI was lower fuel costs, but freight rates also were much less unfavorable for carriers than usual since the fourth quarter of 2022. We expect rates to be mostly stable overall through late this year with spot rates leading the way. However, the capacity overhang remains large and will delay anything that could remotely be called a rebound.”

The TCI tracks freight volumes, rates, capacity, fuel prices and financing costs.

Meanwhile, motive has put out its monthly economic report which contains good news for fleets serving the retail sector. It projects that retail sales will be higher this July than the same month last year, powered by the July 4 U.S. holiday and Amazon Prime Day sales.

The company also predicts retailers will aggressively restock inventory ahead of the end-of-year holiday season as they begin to feel the pinch of rising freight rates that will make last minute restocking more expensive. Ocean rates are already on the rise, Motive reports.

Full story here.

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