Truck utilization rises again in April

After falling during much of 2011, fleet utilization continues to improve as we move further into 2012. There is just enough freight growth to hold capacity utilization in the 93-95% range, surprisingly high given the sluggish economic conditions. Fleets are obviously managing capacity very closely. FTR’s estimate of truck utilization rose once again in April, up to 94.2%. This is 30 basis points higher than last month but it is still below where we were at this time last year.

Outlook
Capacity utilization will stay in the strong, but not critical, 95% range until HOS implementation in 2013. The levels for 2012 should be high enough to create some additional price pressure, although the peak conditions for this recovery will likely occur in 2013, when the changes to Hours-of-Service regulations come into effect.

There are no changes in our outlook this month. A modest lowering of our freight outlook is offset by our lowering of capacity additions into the market over the next 2 years. We stay near the 95% level until the end of this year with no dramatic escalation until HOS implementation in mid-2013.

Our forecast calls for utilization to get back above the 95% level by next quarter and to continue to rise during the rest of 2012. We then expect to be maxed out until the HOS impact comes in the middle of 2013. This will pull capacity significantly tighter over the second half of 2013 and will remain elevated through most of 2014. Utilization will approach the 100% mark – a level that indicates capacity shortages could occur.

This will be an event to watch because as we approach 100% the market will have to prepare for potential capacity shortages. We have previously noted that our chances for wide capacity shortages have lessened, but they are still possible in certain lanes and types of freight. It is time to prepare for that possibility.

Analysis
After falling during much of 2011, fleet utilization continues to improve as we move further into 2012. This is occurring despite the relative weakness in the freight markets to start the year. The conservative capacity management by trucking managers is being reflected in the slowing orders for new trucks. Lack of capacity growth, combined with increases in freight demand, will fund a steady rise in capacity utilization.

Utilization is currently on a slow upward rise and is modestly tight. However, we are still below the levels that we had one year prior. The good news is that we utilization was easing during 2011 and is now finally tightening as we get into 2012.

Although the 2013 HOS changes are less onerous than originally expected, their implementation in a year full of other regulatory pressures will push capacity utilization near the same levels as in the 2004 crisis. Barring a recession, capacity will stay tight longer this time due to more regulatory change. Changes to the expected pace of economic growth or a delay in HOS implementation are the keys to changing our outlook.

While we have a known date and ruling on HOS, including it in the forecast is still an educated guess of sorts –we don’t like to try and guess what politicians or lawyers will do. We do know that capacity will likely stay near its current level (~95%) until the economy changes pace or the HOS rules are finally in place.

NOTE:
FTR’s Active Truck Utilization metric calculates the percentage of the population of active trucks that is required to move the U.S. truck freight. In general, a figure above 95% indicates a tight market where the majority of the truck population is at work. A figure below 90% indicates a weak market where a significant portion of the truck population is idle.