Truck tonmiles continue receding in US: Market forecaster

INDIANAPOLIS, Ind. — The economic outlook for trucking, especially in the U.S., is uncertain at best, with downside risks having risen significantly in recent months.

That was the near-consensus among truck equipment manufacturers and market analysts at the FTR Associates’ annual Freight Transportation Conference held recently in Indianapolis.

FTR, a leading transportation freight forecasting and research firm in the U.S., invited several prominent speakers to discuss the economy’s impact on freight movement for truck, rail, water, air and intermodalism.

James Meil, chief economist of Eaton Corp., William Strauss, senior economist for the Federal Reserve Bank of Chicago and Bill Witte, co-director of the Center for Econometric Model Research, opened the conference. For the most part agreed that the current freight environment depends primarily on developments in the industrial sector; and, while the outlook for industrial production and manufacturing is more robust than prior outlooks, the housing situation is likely to hurt the transportation industry well into 2008.

Freight tonnage in the U.S. will get worse
before it gets better, industry experts predict.

Truck tonmiles are forecast by FTR to decline 2.2 percent in 2007 and rise only a miniscule 0.7 percent in 2008. Specific issues unique to the LTL sector, such as further consolidation, significant changes in services being offered, and union contracts affecting some of these carriers were also highlighted.

Meanwhile, hours of service (HOS) rules and other government regulations; the driver shortage; and highway congestion are other factors leading to the current sluggish freight environment, explained James Miller of Con-Way and Paul Will, CFO of the Celedon Group.

As for what’s happening on the tracks, railroad tonmiles are forecast to decline 2.3 percent in 2007 but rise 1.8 percent next year with current rail freight and rail car demand being hurt by the general weakness in the overall economy. The future for railcar production is expected to settle in the 50,000-70,000 cars per year range due to aging and cubic obsolescence of some rail cars in service today.

Factors mentioned affecting slowing intermodal growth were the ongoing inventory correction in the U.S., the increased use of all-water services from Asia to the east and Gulf coast ports, and the stiffening of truck competition in short haul markets. On the positive side, with imports picking up as the U.S. economy rebounds, intermodal loadings are forecast to rise 3.6 percent in 2008.

A panel of shippers and 3PLs was also assembled. Many shippers assumed that freight hauling capacity will remain tight over the long term due to the demographically challenging driver shortage, increased levels of highway congestion and ever more stringent government regulations affecting transportation. They agreed that mode selection is key to good transportation management and they indicated that they continuously evaluate the best mode to use.