Bulk dump

Bulk/dump loadings down 0.6% in June

Aside from an April uptick, volumes have been falling since peaking in December. Volumes have fallen in five of the last six months. Revised data turned May’s small gain into a sizable decline and June continued the pattern. Bulk/Dump loadings in June fell 0.6% versus May to 15.882 million. The year-over-year comparison has slowed noticeably over the last two months, with June up just 1.7%. The volume surge that occurred during the last two months of 2011 gave quite a boost to the sector and is helping the year-over-year comparisons remain positive, despite the continued monthly declines.

Recent history
Bulk/Dump had a near monumental collapse of 25% in volumes from peak to trough. After suffering such a huge decline it has yet to make up more than a quarter of that lost freight volume fully 2 years into the recovery. Bulk/Dump freight was the second hardest hit sector, faring only slightly better than Flatbed. With construction and housing both freezing up, Bulk/Dump loadings dropped 13.8% in 2009. Volumes had already declined 9.4% in 2008 and 4.2% in 2007. Volumes dropped throughout 2008 and 2009 with the biggest quarterly drop occurring in Q1 of 2009.

Loadings surged in early 2010, but then didn’t move much until the second half of 2011. Since Q1 of 2011 loadings have shown very solid, steady growth – on a quarterly basis. Monthly data has shown much more volatility. Loadings rose 2.6% in 2010 and 2.9% in 2011. Volumes increased 1.5% in Q1, continuing the recent trend, but then dropped 0.9% in Q2 – the first quarterly decline since the start of 2011.

Outlook
This segment remains well below its previous peak, and it won’t reach it for several years – probably not until after the next economic cycle – it would need a huge housing and government infrastructure boost for it to occur sooner. We expect to see year-over-year gains slow over the next year. After getting 5% or better growth 4 times in the last 8 quarters, we are unlikely to see that strong of growth over the next couple of years.

We are now forecasting that loadings growth will accelerate only slightly in 2012, up 3.5%, down from last month’s 4.4% forecast. Growth should then be expected to stay in the 3%+ range, growing 2.8% in 2013 and 3.9% in 2014. After spending some time well above the industry average during 2011, it now looks like the Bulk/Dump segment will track the overall total.

The beginning signs of a housing recovery will help the bulk segment. However, while federal infrastructure spending is up modestly, state expenditures are not. Compared to most markets, this segment likely has very little downside exposure. While it would fall some during a recession it still remains near its trough and the housing and infrastructure segments are unlikely to contract in a significant way.

Analysis
Bulk/Dump was the only trailer segment to show a negative revision to Q2 data. Aside from an April uptick, volumes have been falling since peaking in December. A short-term weather impact would have been finished by now. The outlook was reduced on the basis of the additional Q2 weakness. Year-over-year growth should still improve later in 2012 before slowing dramatically at the end of the year and into early 2013.

Construction goods have weakened recently but most of the Q2 weakness came from movements of Bulk Aggregates. Much of this is used in infrastructure construction along with some fertilizer components – both have been weak of late.

Both Flatbed and Bulk/Dump sectors have performed better than the industry as a whole. Bulk/Dump has been helped by export demand and relatively easy comparisons. It has shown a volatile path, affected by swings in nonresidential construction and infrastructure.

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