Today’s report comes to us via Transport Topics Online. Evidently, folks have crunched the numbers, and overall tonnage hauled by semis was down about 13% for the month of April. That’s a big number, but it became even more distressing when they put it in this frame of reference:
The decline in the for-hire seasonally adjusted truck tonnage index was the biggest in 13 years and left tonnage at a reading of 99.2, its lowest level since November 2001.
Anybody remember November of 2001? About the only things getting shipped were crates of American flags. It was just after 9/11, and I worked at a large retail shop. We had more employees in the store than customers for about six months, we couldn’t move any inventory, and corporate wasn’t going to ship any more product until we sold out the stuff in the back room.
It seems the same trend is developing nationwide, as retailers are doing something called “right-sizing” their inventory. In the same article, Chief Economist for the American Trucking Association, Bob Costello explains:
“While most key economic indictors are decreasing at a slower rate, the year-over-year contractions in truck tonnage accelerated because businesses are right-sizing their inventories, which means fewer truck shipments.
So, the trucking industry is getting walloped, because physical inventories are way too high. Common sense will tell you that this will have a proportionally bad effect on the tire industry. Standard, class 8 semis need 18 tires to run(10, if they are running “super singles”). Less tonnage means less wear on existing tires, with a decreased chance for tire failure. In addition, it means that we will probably see an increase in so-called “deadheading”, where the tractor makes the trip home without hauling any cargo. Again: No trailer = less wear.
With crude prices nearing $65 a barrel, and diesel on the rise, some truckers may just opt to stay home. OPEC has set $80 a barrel as their target price. Demand is already at anemic levels. A modest increase in travel could send fuel prices soaring above that mark. The high cost of fuel may begin to eat into what little discretionary income people have left. When it does, you can expect the products on the shelf to stay there even longer, worsening an already bleak picture.
We aren’t out of the woods yet, folks. I tend to be one of those that believes that the bottom of the market is farther away than some of us would like to believe. I’ll let you know when I see some solid signs of improvement.
Until then, we’ll be here, bringing you the latest news affecting the mining and tire industries. Right now, I’ll be…
Signing off…
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