Chart of the Week: ACT Research Equipment Orders – Class 8 SONAR: ORDERS.CL8
Class 8 truck orders remained unseasonably strong through the first few months of 2024, outperforming last February by over 20%, according to ACT Research. Freight-hauling semi trucks typically dominate this category and have been a good indicator of industry health, but like many indicators, this value’s implications have changed.
Ask transportation service providers the state of the national freight market, and they will all say the same thing: It is awful. National truckload carriers are already tempering expectations for investors in Q1.
Long-term contract rates for dry van truckload freight continue to deflate, showing over 7% lower year over year in early March. In other words, there is very little reason to expect this category of truck orders to show signs of strengthening.
ACT offers up a few explanations, stating that private fleet growth and some level of increased vocational spending thanks to government spending on infrastructure and nearshoring efforts are propping up the order levels.
This makes sense, seeing as how the domestic freight market has been fractured since the pandemic began in 2020.
Looking at rejection rates by trailer type, the flatbed market (FOTRI) had an entirely different trajectory from refrigerated (ROTRI) and dry van (VOTRI). Tender rejection rates for flatbed took a while to increase, peaking after refrigerated and van started to plummet.
This was largely due to the type of freight being consumer goods. Flatbed freight skews toward industrial and construction activity, which was throttled by supply chain and production limitations in 2020-21.
The flatbed market has been healthier after the pandemic because it got less attention and fewer new entrants during that period. Flatbed’s increasing national rejection rate supports the concept that heavy equipment is in higher demand around vocational efforts as well as in this truckload segment.
The less-than-truckload market has also had a different experience from the broader trucking market, thanks in part to the failure last year of the nation’s third-largest carrier, Yellow.
LTL contract rates (LCWT1) tend to follow dry van truckload with a lag of six to nine months. Just as LTL contracts were showing signs of weakening last spring, the news broke around Yellow’s troubles with the Teamsters. This appeared to help keep rates elevated as shippers scrambled to diversify their provider base away from the struggling carrier.
While the LTL space has not been completely inoculated against the overall conditions of the trucking market, it definitely got a strong buffer and was able to maintain more pricing discipline than truckload providers. Todd Maiden recently reported on ArcBest as a shining example of this effect.