Economic & Tank Truck Update Bob Costello Chief Economist & Vice President ATA April 29, 2014
The US Freight Economy We expected the economy to slow in Q1, but the weather was a significant drag. However, some March data was better than expected. Still, it should be weakest quarter of the year. Q2 should be much better. Housing starts were disappointing in Q1, but it should be the best year since 2007. The US energy production boom is a big boost for the tank truck sector. More optimistic on manufacturing activity this year, but it wasn t a big help in 2013. Consumer spending has been choppy, but will accelerate in 2014. Most headwinds (x weather) that remain are primarily from DC.
4% Real GDP & Forecasts 3% 2.8% 2.4% 3.0% 2% 1.9% 1% 0% 2012 2013 2014 2015 Sources: BEA & ATA
5% 4% 3% 2% Quarterly Real GDP & Forecasts 4.1% Inventory Build 2.6% Inventory Reduction & Weather 2.7% 2.6% 2.6% 1% 0% 0.9% Q3 2013 Q4 Q1 2014 Q2 Q3 Q4 Sources: BEA & ATA
Annual Housing Starts (Millions of Units) 1.5 2014 will be the highest level since 2007. 1.389 1.0 0.612 0.783 0.929 1.045 0.5 0.0 2011 2012 2013 2014 2015 Sources: Census Bureau and ATA
6% 5% 4.6% Consumer Spending (Annual Percent Change) Services Goods 4.6% 4.9% 4% 3% 2% 3.8% 3.2% 3.1% 2.2% 3.5% 1% 0% 2012 2013 2014 2015 Sources: BEA and ATA
Factory Output (Annual Percent Change) 5% 4% 3% 3.6% 4.4% 2.9% 3.0% 3.9% 2% 1% 0% 2011 2012 2013 2014 2015 Sources: Federal Reserve and ATA
U.S. Light Vehicle Sales Millions of Units 18 16 14 12 10 8 6 4 2 0 Light auto sales are forecasted to grow from 15.5 million units in 2013 to 16.4 million by 2015. +7.3% +3.4% +2.4% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: IHS & ATA
U.S. Plastics Production 2007 = 100 105 95 Plastics production is expected to grow about 3.4% per year over the next two years. By 2016, production will finally get back to 2007 levels. +6.1% +3.1% +3.6% 85 75 65 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Federal Reserve, IHS, & ATA
U.S. Chemicals Production 2007 = 100 105 Chemical output is expected to accelerate in 2014 and 2015. 100 95 90 85 +1.3% +2.9% +3.6% 80 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Federal Reserve, IHS, & ATA
U.S. Paint Production 2007 = 100 115 110 105 100 95 90 85 80 75 70 Paint production was solid in 2013 and is expected to remain at above average growth levels over the next two years. +8.9% +5.2% +5.1% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Federal Reserve, IHS, & ATA
U.S. Cement Production 2007 = 100 110 105 100 95 90 85 80 75 70 65 60 55 50 After a poor, but growing, 2013, the rate of growth improves some this year and jumps in 2015. +2.5% +3.9% +9.3% 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Federal Reserve, IHS, & ATA
U.S. Food Production 2007 = 100 115 110 105 Food production is expected to grow 2.2% annually over the next two years. +1.6% +2.1% +2.3% 100 95 90 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: Federal Reserve, IHS, & ATA
10.0 8.0 6.0 4.0 2.0 US Crude Oil Production (Millions of Barrels per Day) 5.47 5.65 6.49 7.45 8.39 9.16 0.0 2010 2011 2012 2013 2014 2015 Source: EIA
Thousand of Barrels per Day 1,600 1,400 1,200 1,000 800 600 400 200 0 Diesel US Exports Diesel vs Gasoline Gasoline Source: EIA
US Exports (Millions of Barrels) 450 400 350 300 250 200 150 100 50 0 Diesel: +951% Gasoline: +235% 39.0 45.8 Diesel Gasoline 409.7 2003 2013 153.2 Source: EIA
Diesel Prices 2013 2014 2015 $5.00 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $1.50 $1.00 $0.50 $0.00 $2.41 2005 WTI $/Barrel $97.91 $95.33 $89.79 $2.71 $2.88 2006 2007 $3.80 2008 $2.46 2009 $2.99 2010 $3.84 $3.97 $3.92 $3.85 $3.78 2011 2012 2013 2014 2015 Source: US Department of Energy
Trucking Demand
Changes in For-Hire Truck Freight Volumes 8% 7% 6% 5% 4% 3% 2% 1% 0% Tonnage TL Loads Tank Truck Loads 6.2% 6.3% 6.6% 5.8% 4.5% 2.3% 2.5% 0.8% 1.5% 2012 2013 2014 Sources: ATA s Monthly Truck Tonnage Report & Trucking Activity Report
12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% It Was a Tough Q1 for Freight (Percent Change in Seasonally Adjusted Loads) 2013 Q1 '14 YOY 1.2% 0.7% 1.3% -5.1% 2.7% -1.4% 6.6% Dry Van Flatbed Temp Tank Spot market was robust in Q1 (+67% YoY) as shippers tried to get freight moved. Source: ATA s Trucking Activity Report 0.4%
Tank Truck Sector Continues to Outperform 10% 8% 6% 4% 2% 0% -2% -4% -0.3% the TL Industry Overall (Q1 Year-Over-Year Percent Change; Seasonally Adjusted) Total TL 0.4% 0.6% -2.3% Tank Truck 2.1% 1.2% 1.5% 1.4% 3.4% 6.8% Loads Miles Revenue Rev/Load Rev/Mile Tank truck includes bulk and liquid commodities. Source: ATA s Trucking Activity Report
15,000 Miles Per Truck Per Month are Down too (Includes all types of TL carriers) 10,946 10,000 8,926 7,604 8,250 8,080 7,752 8,066 7,794 5,000 0 2007 2008 2009 2010 2011 2012 2013 Q1 2014 Source: ATA
Trucking Capacity
2% 0% -2% -4% -6% TL Tractor Changes (Percent Change in the Number of Company & IC Tractors) 0.2% 2013 Q1 YOY Mar '14 vs Dec '07-3.5% -8% -10% Includes all types of truckload carriers -9.0% Source: ATA s Trucking Activity Report
110 105 100 95 90 85 80 2005 TL Supply vs Demand 2005 = 100 2006 Oversupply Through March 2014 2007 2008 2009 TL Tractor Count Index 2010 2011 2012 TL Loads Index 2013 2014 Source: ATA based on Trucking Activity Report
Costs
7 The Class 8 Fleet Has Aged, but the Industry Is Struggling to Reduce It (Average Age in Years) 6 5 4 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source: ACT Research
Motor Carriers Are Struggling to Replace Their Trucks $130,000 $120,000 $110,000 New Diesel Tractor (Sleeper) Price Estimate (Annual Averages) $126,000 $100,000 $95,000 $90,000 $80,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ACT Research
Drivers
TL Truck Driver Turnover Rates 150% 125% Large Small 2013 LTL: 11% 100% 75% 50% 25% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: ATA
TL Carriers are Struggling with Independent Contractors as well as Company Drivers 101 100 99 98 97 96 95 94 93 92 91 90 (Independent contractor trends over the last two years) 2012 2013 2014 Includes all types of TL carriers; January 2012=100; Carriers with at least $30 million in annual revenues Source: ATA s Trucking Activity Report Large TLs: -1.6% Small TLs: -6.6%
Average Annual Pay for an Over-the-Road Tractor-Trailer Driver in the For-Hire Truckload Industry $55,000 $50,000 $45,000 $40,000 $35,000 $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $0 $39,035 Includes bonuses; All types of TL drivers included Blue bars is actual pay. The orange line is if it kept up with inflation. $52,820 $49,540 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Sources: American Trucking Associations and BLS
Average Number of New Drivers Needed Per Year Over the Next 10 Years: 96,178 Non-Voluntary Departures 16% Voluntary Non- Retirement Departures 11% Industry Growth 36% Retirements 37% Source: ATA Benchmarking Guide for Driver Recruitment & Retention
Construction Industry Competition 35% 30% 25% 20% 15% 10% 5% 0% 34.3% 28.0% 18.9% 18.3% Housing Starts 2012 2013 2014 2015 9.4% 2.1% 3.3% 4.0% Construction Employment Sources: Census Bureau, Department of Labor, and ATA
Proposed Tank Truck Industry Project
Quantifying the Size of the Tank Truck Industry Piece together datasets to help ascertain tank truck movements Commodity data Truck freight movements Truck capacity data Create a tank truck transportation model Collect some data from current NTTC & ATA tank truck members Tank truck volume, revenue and capacity industry numbers
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What Has ATA Done for Me Lately? Advocacy Successes in 2013 9 th Circuit Victory Protecting IC Model U.S. Supreme Court Victory Protecting Federal Preemption Authority Sleep Apnea Law Defeat of VA I-95 Tolling Plan Defeat of NC I-95 Tolling Plan
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Top Policy/Regulatory Issues Hours of Service Restart Changes Flexible Sleeper Berth Pilot Program CSA Improvements Fuel Efficiency Standards Round II Electronic Logging Device Mandate Drug and Alcohol Clearinghouse Implementation of MAP 21 Freight Provisions Redundant Security Threat Assessments
Hours of Service Update Restart Restart restrictions are a real problem T&I Chairman Shuster and Rep Petri requested GAO evaluate FMCSA s Cost-Benefit analysis & restart research ATA working with Appropriators seeking stay to restart changes
Hours of Service Update Sleeper Berth Rules ATA, joined by the MN Trucking Assn, recently filed a petition for a flexible sleeper berth pilot program FMCSA is very interested in initiating a pilot program; will work with ATA, MTA and other industry orgs in 2014 Longer term goal is achieve greater sleeper berth flexibility for solo and team drivers
Compliance Safety Accountability Top 3 Problems ATA Working On All Scores must measure safety performance; some currently DO NOT DO SO ALL truck-involved crashes are included Public can be misled by inaccurate Scores
2014 Legislative Priorities Highway reauthorization Fuel tax increase with indexing Oppose tolling of interstates Dedicated highway freight program Increases in truck productivity Comprehensive tax reform Congressional action on HOS Congressional oversight of CSA
2.00 Millions Tractor-Trailer Drivers Demanded and Supplied Trend-Line for Number of Tractor- Trailer Drivers Demanded 1.75 1.50 239,000 potential shortfall Trend-line for Number of Tractor-Trailer Drivers Supplied 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Source: ATA See www.trucking.org for white-paper
Non-Voluntary Departures 16% Voluntary Non- Retirement Departures 11% Average Number of New Drivers Needed Per Year Over the Next 10 Years: 96,178 Industry Growth 36% Retirements 37% Source: ATA Benchmarking Guide for Driver Recruitment & Retention
REGULATORY FACTORS THAT WILL IMPACT DRIVER SUPPLY Electronic Logging Devices Some Drivers Are Simply Technology Adverse and Will Refuse to Use ELDs. Hours of Service Reduced Productivity Per Driver Will Increase Demand. Sleep Apnea Screening and Treatment Obese Drivers may Refuse To Be Tested or To Endure CPAP Therapy CSA Greater Scrutiny of Safety Metrics Will Make More Drivers Unemployable Medical Registry Tighter Controls on Medical Qualifications Will Weed Out Unqualified Drivers, Further Shortening Supply. Background Checks Redundant and Costly Criminal History Records Checks Are a Hassle Factor for Drivers.
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