Tank loadings drop 0.2% in July

There were noticeable upward revisions in tank loadings going all the way back to last October, with a primary focus in Q2. The revisions have improved our near-term outlook for the market. Despite that good news, loadings fell modestly in July, down 0.2% to 9.417 million. Year-over-year growth has shown significant improvement with July up 1.8%, the best showing since last June.

Recent history
Tank freight fell hard in the middle of 2008 but had a surprisingly strong uptick to end the year. Volumes then proceeded to drop for the next four quarters, bottoming out at the end of 2009. Tank loadings fell 9.0% in 2008 and a further 5.8% in 2009. Growth was solid and steady throughout 2010 but the market weakened considerably during 2011, with a big drop in Q3. On an annual basis volumes were nearly unchanged in 2010, up just 0.7%. 2011 wasn’t much better with loadings growing just 1.9%. Volumes ticked up solidly in Q1, rising 1.0% and gains remained strong in Q2 with an additional increase of 0.8%.

Growth will remain weak for this recovery, rising just 1.4% in 2012, but the outlook has improved a little. The year-over-year comparisons should improve during the latter half of 2012 as we compare to a weak period in 2011. Growth will remain weak in the forecast, rising just 1.3% in 2013 and 1.7% in 2014.

The FTR tank data has shown slow growth due to weak demand in fuels and chemicals as its prime drivers. Note that strong demand in crude oil movements is not fully picked up in FTR’s measurement. Although that phenomenon is at, or just beyond, a peak, it has generated substantial tank freight growth over the last two years.

Tank loadings have been a disappointment during this upturn. We expected more growth due to the low cost of natural gas feedstock. We have three explanations: First, fuel demand is down; U.S. driving continues to decline – especially when fuel is rising. Second, any increases in U.S. exports of chemicals, due to lower costs, is denied to trucks because most major U.S. chemical exporters are on salt water. The volume goes by ship. Third, the oil drilling market is hidden in the data. Growth there is invisible in the stats.

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