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Extra, Extra: Industry seems bound for improvement

IF BULK carriers are looking for a little good news, they can turn to Peter Toja, an industry economic consultant and president of Economic Planning Associates, Smithtown, New York, who says of the tank truck industry: “It all looks darn good for that industry.”

Toja is reacting to what he sees as current improvement in an industry that has suffered through a failing US economy while having to juggle skyrocketing costs in insurance and other fixed expenses. Furthermore, he is projecting more good news for the near future that includes a growing demand for new and used tank trailers, particularly for those used to haul chemicals, petroleum, and foodgrade products.

“I don't see too many negatives out there,” he says. “I would be optimistic from this point on.”

Toja adds that about 4,300 tank trailers were produced last year, and he anticipates approximately the same number will have rolled off the line by the end of 2002. There's a difference, though. The trend for production was flat at the end of 2001. Conversely, the trend should be heading upward as the new year arrives, which makes Toja comfortable in predicting that 5,200 units will be manufactured next year.

As for the industry in general, the production of alternate fuels may generate added business. Ethanol production is growing by “leaps and bounds,” he says. Mix in a stronger agriculture market overall, stemming from a recovery from last year's drought in many areas, and the picture seems even brighter.

“It is a year, I think, representing a bottom of the trough with some signs of recovery, but with many spikes up and down,” says Bob Foster, Heil Trailer International president. “This year has been a rocky road for both the tank trailer industry and our customers, what with all the insurance, driver problems, and overcapacity of the manufacturers, carriers, and the petrochemical industry. We find our customers and their customers are making decisions in a very short time period and must have a very quick response. I think 2003 will be erratic but, in general, upward. It will not be without its problems in stability and competitiveness.”

Most customers want to deal with tank manufacturers who have the resources, ability to take care of them, staying power to serve them in tough times, and be assured the manufacturer will be there for the long haul, he adds.

Heil has used the time of domestic economy slowness to invest in technology for all its operations to improve productivity and competitiveness. “We are emerging from this recession stronger than ever with more things to offer,” he says.

Mike O'Donell at Stuart Tanks Sales Corporation, Elkhorn, Wisconsin, reports 2002 sales being better than the previous year for both new and used equipment. Types of trailers leading the way were foodgrade liquid and dry bulk, petroleum, and dry bulkers used for cement. Chemical tank sales were slow.

“Our service areas are average, and parts sales have increased from a year ago by 10 percent, but margins in all areas are tight,” he says. “We feel the economy is starting to turn around slowly but will take at least until next spring before we see greater improvement. It's really hard to predict this economy at this time.”

At Brenner Tank LLC in Fond du Lac, Wisconsin, Joe Collien says: “Order intake has picked up slightly, but we are definitely seeing an uptick in quoting interest. The chemical side is still relatively flat and is not coming back as quickly as we would like.”

One reason for the market downturn may be the concern carriers have about new Environmental Protection Agency (EPA) engine requirements. Carriers may have postponed trailer purchases to buy tractors before the EPA requirement goes into effect. Nevertheless, Collien expects 2003 to be a year with improved sales.

Mike Pitts of Mississippi Tank Co, Hattiesburg, Mississippi, also is optimistic, particularly about the company's re-entry into the MC331 bobtail business.

“We are just getting started in building bobtails but will be finishing our business ahead of projections,” he says. “It is flourishing. The new plant in Hattiesburg has completed more than 50 new or refurbished bobtails. We see even better demand for next year, and we think our trailer business will be more back to normal. We have been getting a lot more inquiries in the last 70-90 days.”

Optimism was expressed by Tom Anderson at LBT Inc, Omaha, Nebraska. “We're hiring people, in fact we hired three people today,” he says. “We began to see some improvement in mid-summer.”

Many carriers had postponed equipment purchases but are now reconsidering. Sales are back to a level closer to what was occurring in 2000, he adds.

“Overall it's been a pretty decent year,” says Tim Esterling, WestMor Industries LLC, Morris, Minnesota. “It's been a good year for propane transport sales, despite fierce competition.” He has seen enhanced sales for trailers that haul a carbon dioxide/ethanol byproduct, as well as liquid petroleum gas trailers in the 10,500-gallon to 14,700-gallon range. WestMor sales have increased for bobtails, but he says that is a result of a company marketing effort rather than an overcall demand in the industry.

For next year he is predicting a “little above average” in sales.

Jack Olsta and Taylor Craigen at The Jack Olsta Company, Huntsville, Texas, also are reporting improved sales. “The first part of the year was very slow — not much happening at all,” says Craigen. “It was running behind 2001. Throughout the first six months of the year things would jump up, but then they would die away. In the last month to six weeks, we have seen the inquiries increase. Carriers are making plans to purchase late this year, or early next year.”

Olsta says that sales of acid trailers and those used for basic chemicals typically are the first to recover from a downturn. “Petroleum — gasoline — has stayed stable and strong and I'm not sure why,” he says. “The American public has the love of the automobile.”

At the same time, Olsta continues to have concerns about the overall economy in the United States. He notes that cities are reporting a downturn in sales tax receipts (which indicates a cutback in consumer spending), and states are running low in road construction funding. “I'm very moderated on my enthusiasm for the future,” he says.

Olsta says that tank trailers produced today last longer. Some that once were on the road only five years now can be used 10 to 12 years.

Olsta also notes that the market for leased trailers seems to be growing. “We've seen a pickup in that business, and we look at that as a positive sign.”

A cautious note was sounded by Jim Jungles of Polar Tank Trailer Inc, Holdingford, Minnesota. He says there seems to a slight increase in activity in the marketplace, but he's staying away from calling it a rebound. Sales of petroleum trailers have been low, but demand for sanitary tank trailers is high, particularly for milk, he adds. He also notes that the used market continues to suffer from a glut of trailers due to the Matlack bankruptcy in 2001.

“I really do not believe that 2001 or 2002 will go down as banner years for anyone in the manufacturing sector,” says Bob Baker at Semo-Baker, owner of Acro Trailer Company, Springfield, Missouri. “Most that I'm familiar with have struggled just to keep a backlog, and in doing so are pricing equipment at numbers that we have not seen for a long time. Although it's just my personal opinion, I really doubt that any major tank trailer manufacturer has painted much, if any, ‘black ink’ over the past year or two.

“From our perspective both as a distributor and a manufacturer, I believe the term, holding our own, would be appropriate. Not really what one wants to see as a business owner, but based on the market conditions I'll take it for now.”

He, too, has received more queries from customers over the second quarter about equipment purchases. “I really hope that this continues throughout the remainder of 2002 and into 2003,” he says. “Surprisingly, a lot is related to the DOT407 market. The only area that seems somewhat discouraging is that so much involves trade-in equipment as opposed to new equipment just for new business. We continue to be optimistic for 2003 and only trust that expansion and diversification has come at the right time for us.”

At E D Etnyre & Co, Oregon, Illinois, 2002 has been fairly steady, but softer than most years, says Tom Brown. Etnyre specializes in building steel and aluminum tank trailers, particulary those used to haul high-temperature products.

“Much depends on haulage contracts,” he says. “If shippers are changing carriers — a lot of it is just the mood of the market — purchases can be delayed. As for next year, we are in a wait and see mode. If I was forecasting next year, I would look for a duplicate of this year, but hoping there is some springback.

“Our business is seasonal with sales in late winter and spring. It's hard to get a feel for what next year will be like.”

Although Bob Sundin, Stainless Tank & Equipment, Cottage Grove, Wisconsin, reports a “sad” 2002 for most trailer sales, the edibles equipment market has been “pretty decent. I think sales may start to increase a little bit now.”

Sundin also reports queries from customers planning purchases in the first quarter of 2003.

More good news came from the Northeast where David Burke of Boston Steel & Manufacturing, Boston, Massachusetts, says sales are much better than he had projected. “The warm winter (2001-2001) has definitely affected the truck tank industry,” he says. “However, the dread I felt at the end of last winter did not result in the extreme business drop-off I expected. Also, conversations with customers give me great enthusiasm for next year. As a business, we have been fortunate this year.”

David Amthor, Amthor International, Walden, New York, and Gretna, Virginia, says: “We've actually been busy through the entire year. Heating oil and propane trucks have been good. Equipment always has to be updated, and we are seeing more updating than new truck purchases. As for next year, we'll just have to see how the winter goes.”

If times have been difficult in the United States, they were much more serious in Latin America because of economic instability, says Heil's Foster. “Latin America has been a region of great contrast. While the area has undergone much financial turmoil, we had a very good year there, as with our other international business units. We learned to capture the good ideas and synergy of all our global products, and offer all our customers many more good ideas for options and designs. It has helped us tremendously during this past time of domestically low demand.”

To the north of the United States, Alain Chatillon, Tankcon Frp Inc, Boisbriand, Quebec, Canada, says of the fiberglass reinforced plastic (FRP) trailer market: “It's slower. It's a niche market, so we don't necessary follow the trend. It's slower now that it was when we had the big boom several years ago. Carriers are waiting to order when they are really needed.”

One expected improvement for sales is a move by carriers to haul elementary chlorine in tank trailers rather than in cylinders, he adds. (Please turn page)

Denis Marcus, Comptank Corp, Bothwell, Ontario, reports improved sales. “We just recently began producing a new generation of FRP tankers. The new Comptank trailers are 3,000 pounds lighter than our original Comptanks and are significantly less expensive. This combination of lower weight and lower price has encouraged people to buy,” he says.

He believes that the market has begun to pick up, with requests for price quotes becoming more frequent. “We are anticipating 35 to 40 trailer sales for this upcoming year,” he says.

Marcus sees the market from two perspectives, as a manufacturer and as a carrier. He reports the carrier division is in an upswing. “In the last six months we have been consistently busy and have not had many high and low intervals. However, we are plagued with the same problems facing most carriers, increased insurance costs, shortage of qualified owner-operator and company drivers, and now the increased costs of tractors due to new EPA engine emissions limits.

“I've said all along that the bulk liquid business provides a very undervalued service, and shippers continue to beat up the transporter. Couple this with all the other issues we face, and it's a tough job we have running a profitable bulk fleet in today's world.”

Those sentiments are echoed by Cliff Harvison, president of the National Tank Truck Carriers. “Three external forces will continue to dominate every tank truck carrier's business model,” says Harvison. “First, what was once an insurance crisis has been expanded into a full-blown catastrophe. Not only are premium increases draining the industry's coffers, we see more and more underwriters either exiting the market or paring the scope of coverages.

“To meet this, carriers are being forced to trim their liability limits, or dramatically increase deductibles, or both. No carrier, regardless of its safety record, is exempt from this reality. Next, carrier management is still waiting for the other shoe to drop in terms of security mandates from the federal government.

“Right now, at least three agencies — the Research and Special Programs Administration, Federal Motor Carrier Safety Administration, and the Food and Drug Administration — have proposals out collecting data on everything from team drivers and mandated vehicle tracking to electronic container seals. There's no telling which of these concepts will be mandated, but any or all of them will cost money and operating resources.

“Finally, we're seeing the re-emergence of the driver shortage of the late 1990s. Carriers within our membership are, today, turning down loads because they can't fill seats in the cab. Soon, hazmat drivers will have to undergo criminal background checks, and the new Department of Transportation regulations mandating driver disqualification for certain violations while driving a passenger car will accelerate attrition. These factors, combined with the trickle down effect of the Teamster/UPS contract will put even more pressure on the revenue side.”

To counter some of the pressures on the industry, Foster emphasizes the need for the industry to support and ask for enabling legislation for higher weight laws for highways. “This will help our industry evolve into one requiring fewer trucks and drivers with more productive equipment,” he says. “We must continue to change our products to keep them modern, safe, and more productive as a system with the shippers and receivers. We see this as an opportunity rather than a problem.”

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