While the sky still isn’t falling, ACT Research findings indicate that there are more ominous clouds on the horizon that bear watching closely moving forward, one being a significant uptick in trailer cancellations for a second consecutive month, according to this month’s issue of ACT Research’s State of the Industry: U.S. Trailers report.
“While the broad-based nature of cancellations suggests the turn is starting to come into focus, this is juxtaposed against a backdrop of rather robust backlogs, even with declining orders,” said Jennifer McNealy, director, CV Market research & publications, ACT Research. “The seasonally adjusted backlog-to-build (BL/BU) ratio gained 120 basis points (bps) m/m, to 8.0 months in May. Seasonal adjustment takes dry van BL/BU to 7.4 months and reefers to 9.1, so despite the improvement in build, this essentially commits the industry through year-end 2023.”
“Fleet commitments remained mixed in May. Total cancels grew to 4.2% of backlog, higher than April’s 2.8% and significantly higher than March’s 0.9% rate,” McNealy stated. “That said, while several segments were at or below 1.5%, dry vans rose to 4.1%, reefers are now at 6.5%, and flatbeds hit 4.7%.” She added, “April’s increase raised an eyebrow, but we cautioned that one month does not a trend make. With two consecutive (and large) jumps in cancellations, both eyes are now wide open.”
McNealy concluded that certain manufacturers of trailers have reported a decrease in customer orders for the current and upcoming years. Additionally, there are fewer customers waiting on the sidelines to take advantage of any available equipment or production slots, according to ACT Research, this indicates a clear shift in the demand dynamics within the industry.