Bob Costello

Tank truck carriers still leading the rest of trucking in freight volume

July 1, 2014
BOB Costello, chief economist for the American Trucking Associations, drew applause when he told those attending the National Tank Truck Carriers Annual Conference that the tank trucking is still the best performing segment of the trucking industry, as it has been for several years.

BOB Costello, chief economist for the American Trucking Associations, drew applause when he told those attending the National Tank Truck Carriers Annual Conference that the tank trucking is still the best performing segment of the trucking industry, as it has been for several years.

Tank truck loads were up roughly 6.6% during 2013, and overall tonnage was up 6.3%. He predicted that tank truck loads should grow by about 5.8% during 2014 despite one of the toughest winters the United States has experienced in a number of years. Proof of the vigorous tank truck carrier performance was reflected in the strong turnout at NTTC’s 2014 Annual Conference and Exhibits April 27-29 in Las Vegas, Nevada.

Costello went on to say that overall the US economy continues to show signs of improvement despite a dismal weather-affected first quarter. “We expected the economy to slow in the first quarter, but the weather was a significant drag,” he said. “Still, the first quarter should be the weakest of the year.”

He added that gross domestic product (GDP) growth could hit 2.7% during the second quarter before returning to the average of 2.6% for the rest of the year. Costello cited a number of factors for the upbeat forecast on GDP.

Housing starts have been growing steadily and should top the one million mark for the first time since 2007. A lot of home remodeling also is taking place. All of this means more shipments of a wide range of liquid and dry bulk construction materials.

Economic power

Growth in manufacturing activity powered the US economy out of the recession, and that should continue. Costello projected factory output increases of 3.0% in 2014 and 3.9% in 2015. “Tank truck carriers will be among the beneficiaries of this,” he said.

Chemical output will continue to accelerate over the next two years. In 2014, chemical production should grow by nearly 3%, and 2015 growth should be in the 3.6% range.

Plastics production is expected to grow about 3.4% over the next two years. “By 2016, we are projecting that plastics production will have climbed back up to where it was in 2007 before the recession,” Costello said.

Paint production grew by a solid 8.9% in 2013 and is expected to remain at higher than average growth levels over the next two years. Costello projected 5.2% growth in paint output this year and 5.1% growth in 2015.

US cement output remains far below 2007 levels, but it is improving. The rate of growth should improve to about 3.9% this year and should jump to around 9.3% in 2015.

“We won’t see real improvement until the federal government boosts spending on road construction,” Costello says. “We simply have to start spending more on roads and highways.”

Oil output

Then there is the energy sector, especially US crude oil production, which is up 67% from 2010. US crude oil production should grow by around 8.39 in 2014 and by 9.16% in 2015. “We are on pace to reach an all-time high in crude oil production in the United States,” Costello said.

The United States is now awash in gasoline and diesel refined from domestically produced crude oil, and the volumes are rising. Not surprisingly, refined petroleum exports have risen dramatically. From 2003 to 2013, diesel exports were up 951% and gasoline exports rose 235%.

All of these economic factors are keeping the tank truck sector busy, and the outlook remains positive for the near-term future. However, overall trucking capacity continues to shrink.

“We’re not seeing any capacity increase even as demand for trucking services has grown,” Costello said. “We compared the size of the tractor fleet for all types of truckload carriers between December 2007 and March 2014 and found it had shrunk by 9.0%. Our growing capacity shortages were highlighted during this past winter.”

Older fleets

The overall Class 8 truck fleet also is getting older. Today, many fleets are running tractors that are more than six years old. A big reason for the aging tractor fleet is the high cost of new equipment. Much of the higher cost comes from federally mandated emission control technology and related hardware.

The average cost of a new sleeper tractor with a diesel engine has risen from $95,000 in 2002 to $126,000 in 2013. That is a big jump, especially for smaller fleets.

Driver turnover and availability also are factors impacting fleet capacity. Driver turnover in 2013 for large fleets was close to 100% and was in the 80% range for smaller fleets.

Company drivers accounted for much of the turnover, but the owner-operator supply also continues to fall. The independent contractor supply is projected to shrink around 1.6% for large fleets in 2014 and 6.6% for the smaller fleets.

Some of the driver shortage can be attributed to pay. Costello pointed out that while driver pay has increased since 2000, it isn’t keeping up with inflation. Including bonuses, driver pay went from an average of $39,035 in 2000 to $52,820 in 2013.

“That’s not enough,” he said. “Driver pay must go up more if the trucking industry hopes to attract enough new drivers to meet future demand.”

Driver need

The trucking industry as a whole will need nearly 100,000 more drivers per year over the next 10 years. Growing demand comes from four key factors: Industry growth (36%), retirements (37%), voluntary non-retirement departures (11%), and non-voluntary departures (16%).

“We can deal with the driver shortage, but it is going to take work,” Costello says. “One reason is that there is growing demand for the same pool of potential workers from other industry sectors. For instance, as the construction industry recovers, construction companies are after many of the same group of workers that drive trucks.”      ♦

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About the Author

Charles Wilson

Charles E. Wilson has spent 20 years covering the tank truck, tank container, and storage terminal industries throughout North, South, and Central America. He has been editor of Bulk Transporter since 1989. Prior to that, Wilson was managing editor of Bulk Transporter and Refrigerated Transporter and associate editor of Trailer/Body Builders. Before joining the three publications in Houston TX, he wrote for various food industry trade publications in other parts of the country. Wilson has a bachelor's degree in journalism from the University of Kansas and served three years in the U.S. Army.