Demand for leased tanks growing

April 1, 2004
TANK TRAILER leasing companies report stronger demand from virtually all customer sectors. A strengthening economy that has boosted demand for chemicals

TANK TRAILER leasing companies report stronger demand from virtually all customer sectors. A strengthening economy that has boosted demand for chemicals gets much of the credit.

Leased tankers are going into both transport and storage service right now, according to Rich Parillo, president of Matlack Leasing LLC. Parillo's company has seen a 15% increase in demand for leased tank trailers.

“Activity is up across the board,” Parillo says.

Ralph Nappi Jr, president of Transport Resources Inc, says the utilization rate of his tank trailer lease fleet has been well above 80% for the past year and a half. That compares with lease rates in the mid 60s during 2001 and 2002.

Bulk Resources Inc expects to have all remaining inventory in its 350-trailer fleet leased out by June. “We're very optimistic at this point,” says Eldon “Buzz” Babbitt, Bulk Resources president.

Southern Tank Leasing is busier this year than it was in 2003, according to Boyd Duckett, executive vice-president of Southern Tank Leasing. The greatest demand at the leasing company has been for tank trailers used in plant storage.

Growth factors

A number of factors seem to be driving demand for leased trailers, and the improving economy tops the list. Short-term shipper contracts, reduced productivity from the hours-of-service changes, and higher equipment prices are other contributors.

“As the economy has strengthened, tank fleets have gotten busier,” Duckett says. “We think the tank truck industry will have steady growth through 2004. Our improved business levels in tank leasing are mirroring the tank truck industry.

“We don't expect a big burst of business, but we're all coming out of the recession. As transport activity picks up through the rest of the year, we think more carriers will take a look at short-term rentals of tank trailers. Rates are very reasonable right now.”

Parillo echoes Duckett's view of trailer lease rates. “We're leasing tank trailers at levels below what we'd like to see,” he says. “It's a bargain for the fleets and other leasing customers.”

He adds that short-term shipper contracts have been a significant factor driving demand for leased tank trailers. “Fleets don't want the risk of buying new equipment for a shipper contract that lasts just a year or two,” Parillo says.

Duckett also cites short-term shipper contracts as a key driving force, particularly for leasing of specialized equipment. “Shippers are demanding a lot more specialized equipment, but many are not offering the long-term contracts that are needed to justify purchase of those tanks,” he says. “Why buy a new trailer when there is a good risk that it might be parked in a few months?”

Nappi agrees that leasing companies have benefited from the inability of carriers to get long-term contracts from shippers. Unfortunately, that also means short-term lease contracts.

“That's nothing new, though,” Nappi says. “A year-long contract is a good one.”

Steel surcharges

Babbitt says steel surcharges benefit tank leasing by pushing up new trailer prices and slowing new equipment purchases by fleets. Surcharges announced since the first of the year have added approximately $4,000 to the price of a new DOT407 trailer, he says.

Leasing company managers are less certain about the impact of the new hours-of-service rules. Parillo says they seem to have had a role in boosting demand for leased tank trailers.

Duckett thinks otherwise, though. “The new hours of service will make many tank fleets less productive, but I don't think that will have a big impact on leasing,” he says. “Fleets still have a lot of idle equipment.”

While demand for specialized tank trailers is on the rise, standardized chemical units still get the most attention. The DOT407 trailers have capacities ranging from 5,000 to 7,000 gallons, and most are insulated. Both straight-barrel and double-conical units are in demand. Spring suspensions remain popular.

Multi-compartment tanks top the list of specialized equipment. Babbitt says Bulk Resources just bought 10 more multi-compartment trailers in response to customer demand.