Tank loadings jump 1.1% in June
Despite a significant jump in June loadings the Tank outlook is relatively unchanged and remains underwhelming. Loadings in June were at 9.376 million – the best monthly volume total since early 2011. Loadings jumped 1.1% versus the prior month and the surge moved the year-over-year comparison into positive territory – barely. Volumes were just 0.3% better than last year, and they have been flat or negative for most of the last year. After moving the outlook significantly lower the last few months there was no change this month.
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 1.8%. Volumes ticked up solidly in Q1, rising 0.8% and strong gains in 2 of the last 3 months allowed a further gain of 0.4% in Q2.
Growth will remain weak for this recovery, rising just 0.7% in 2012. The forecast took a big hit recently as we significantly reduced our chemicals outlook. That holds true. Still, 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 very weak in the forecast, rising just 0.5% in 2013 and 1.1% in 2014.
Tank loadings have been the big 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.
To that third point, FTR has done additional research into this market. Our initial estimates show that more than 750 truckloads per year accompany a new well field. More importantly, most of this activity is not represented in the typical trucking stats, including our own. The vast majority is related to water, both inbound and outbound. With thousands of new wells being created each year, this amounts to a significant amount of activity that is not getting fully represented. Consider this an upside to our relatively weak forecast of the ‘traditional’ tank markets.
Note that any recent reductions in natural gas drilling have generally been offset by increases in oil drilling, also using fracking. This same activity is helping the flatbed sector.