Take the pandemic’s ongoing and variable impact—from local to global—on the supply chain, add it to the freight surge following the COVID-19 shutdown and commercial vehicle manufacturers’ typical early-cycle ramp-up challenges, and OEMs find themselves heading into spring with an unprecedented imbalance in the supply/demand equation. For trailer builders, until additional material, parts and labor can be locked-in, the math means either extending the backlog or turning away orders, or so suggest a couple of recent reports from ACT Research.
February net US trailer orders of 26,414 units fell nearly 16% from the previous month, but rose almost 88% compared to February of 2020. Before accounting for cancellations, new orders of 28.3k units were down 14% versus January, but 74% better than the previous February, according to this month’s issue of ACT Research’s State of the Industry: U.S. Trailer Report.
“Although it seems many OEMs are fully committed for dry vans and reefers this year, negotiations with fleets continue,” said Frank Maly, director–CV Transportation Analysis and Research at ACT Research. “While orders will continue to be booked, without meaningful increases in production rates, backlogs will remain extended.
“Although not official, the backlog-to-build ratio points to a de facto opening of 2022 orderboards by several OEMs, although one has publicly indicated that they are pausing further order acceptance in the short-term.”
Likewise, ACT Research reported that the freight-generating sectors of the economy are strong, freight rates are at record levels, and commercial vehicle demand is hot—but supply-chain constraints are restraining 2021 expectations. That’s from the release of the latest Commercial Vehicle Dealer Digest, which combines ACT’s proprietary data analysis from a wide variety of industry sources, paints a comprehensive picture of trends impacting transportation and commercial vehicle markets.
“With orders remaining hot through February reporting from ACT, backlogs and backlog-to-build ratios continuing to rise, and new vehicle inventories tight, the problem isn’t demand, but supply, as the new vehicle demand story remains unchanged,” ACT President and Senior Analyst Kenny Vieth said. “The supply chain’s ability to respond to demand will be the critical determinant of commercial vehicle production in 2021.
“To no small extent, it appears that the more traditional early-cycle ramping pains (tires, assorted cast parts, wiring harnesses) are taking a backseat to more cycle-specific constraints, which begin with the simultaneous global ramp in economic activity overlaid with pandemic-specific challenges.”
Vieth also noted that freight rates ended February at record levels (seasonally adjusted) and started March on an upswing.
“With the nation’s ports backed up for months, commodity prices soaring, the manufacturing sector heating, and the housing market already in full swing, there is unparalleled visibility to strong freight flows,” he said. “Freight is not typically a backlog business, but that is clearly not the case today.”
Trailers orders dipped month-over-month in February but remained elevated compared to the same month last year, according to the latest reports from ACT Research and FTR Intel.
ACT’s preliminary estimate placed February’s net order volume at 24,200 units, which is an 82% increase from February 2020 but a 21% decline from January 2021. FTR reported net trailer orders of 23,100 units, down 23% month-over-month but up 64% year-over-year, with February activity “consistent with seasonal trends.”
Trailer orders for the past 12 months total 322,000, FTR said.
Frank Maly, ACT’s director of commercial vehicle transportation analysis and research, said year-over-year improvement in net orders is a “foregone conclusion” over the next few months, given last year’s COVID-related soft economy.
“February’s sequential decline in net orders was a bit larger than seasonal patterns would project, but was directionally correct,” Maly said. “Preliminary results for the month still show that the industry backlog continued to grow in February, reaching the highest point since March 2019. With many OEMs reporting their capacity committed for the year, there may be some reluctance to push the backlog horizon out even further, on both the part of OEMs and fleets.
“The backlog horizon will be pulled forward in response to higher OEM build rates. February prelims indicate that goal remains elusive, with minimal increases in production rates last month. Our discussions indicate that staffing remains the primary headwind impeding higher production, with component and material supplies also noted as concerns.
“Fleets want to add more trailers to their operations, but would certainly like more advantageous delivery timeframes.”
FTR concurred, saying more trailers are need to meet growing freight market demand. Most fleets already placed their orders for 2021 delivery, FTR said, especially for dry and refrigerated vans. Orders in the flatbed and other vocational segments are expected to continue to recover until entering the summer months.
“Fleets have placed large orders for trailers in response to the robust freight demand,” said Don Ake, FTR’s vice president of commercial vehicles. “OEMs are under pressure to fill these orders due to bottlenecks in the supply chain. Suppliers are facing worker shortages; some raw materials are scarce and there are still delays getting some imported parts through the West Coast ports. Once the situation improves, production will be steady, at high volumes for an extended time.
“2021 will be another fantastic year for the trailer industry once the supply chain stabilizes. Freight growth should continue to be vibrant throughout the year. Consumer freight has been elevated for months and now manufacturing freight is poised to bounce. Demand for trailers will continue at elevated rates, right into 2022. Fleets desperately need more trailers right now and this trend will continue until supply catches up with demand.”
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Continued demand, limited production push trailer orders into 2022 - Modern Bulk Transporter
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