Bulk/dump loadings up in April

After having three straight months of falling volumes April rebounded as expected. Bulk/Dump loadings jumped 2.3% versus March, the first monthly gain this year. The year-over-year comparison accelerated in April after slowing in March, up 7.1%. Loadings stood at 16.259 million in April, nearly matching where we were in January. Despite the weakness at the start of the year the volume surge that occurred during the last two months of 2011 gave quite a boost to the sector and is helping the year-over-year comparisons remain strong.

Recent history
Bulk/Dump had a near monumental collapse of 25% in volumes from peak to trough. After suffering such a huge decline it has yet to make up more than a quarter of that lost freight volume fully 2 years into the recovery. Bulk/Dump freight was the second hardest hit sector, faring only slightly better than Flatbed. With construction and housing both freezing up, Bulk/Dump loadings dropped 13.8% in 2009. Volumes had already declined 9.4% in 2008 and 4.2% in 2007. Volumes dropped throughout 2008 and 2009 with the biggest quarterly drop occurring in Q1 of 2009. Loadings surged in early 2010, but then didn’t move much until the second half of 2011. Since Q1 of 2011 loadings have shown very solid, steady growth. Loadings rose 2.6% in 2010 and 2.9% in 2011. Since it does not have nearly the manufacturing component that the Flatbed segment does, the growth in Bulk/Dump has been more modest so far in this recovery, but that could start to change if housing and infrastructure begin to heat up.

Outlook
This segment remains well below its previous peak, and it won’t reach it for several years – probably not until after the next economic cycle – it would need a huge housing and government infrastructure boost for it to occur sooner. After relatively modest gains in both 2010 and 2011, we expect to see year-over-year gains at or above 5% for most of 2012 with growth moderating slightly in 2013.

We are forecasting that loadings growth will accelerate in 2012, up 5.0%, before settling into growth of nearly 4% for 2013 and 2014 – up 3.7% and 4.3%, respectively.

The beginning signs of a housing recovery will help the bulk segment. However, while federal infrastructure spending is up modestly, state expenditures are not. Compared to most markets, this segment likely has very little downside exposure. While it would fall some during a recession it still remains near its trough and the housing and infrastructure segments are unlikely to contract in a significant way.

Analysis
Increases in infrastructure spending and the beginnings of construction recovery have moved this segment back above industry averages. Note that the late 2012 year-over-year dip is a function of the 2011 comparison, not a slowing in demand. Bulk loadings benefitted in late 2011 from increases in infrastructure spending and good winter weather.  The uptick in volumes in April is indicative of a market that is no longer suffering from the pull forward of demand that occurred because of the mild winter weather. The housing recovery should also help keep this segment in strongly positive territory in 2012.

Bulk/Dump freight continues to see the potential for upside growth should the glimmers of improvement in the housing sector turn into a real trend. Improvements in lumber and housing starts remain erratic, as is typical, but continue to indicate that they are trending upwards. However, bulk loadings will remain well below its pre-recession level due to the struggles in infrastructure policy and generally low levels of housing construction. Much of this sector is aggregates used in road building and housing. This segment has been strongly affected by the fall in state infrastructure spending.

NOTE:
U.S. Truck Loadings is the estimated number of truck loads originated in the United States plus truck loads that come to U.S. destinations from Mexico and Canada. It is tons divided by the average tons per truck. FTR’s data is seasonally adjusted and measures both short and long-haul OTR segments.