A good time to be hauling dirt.

Most people do not understand what an off-highway truck is. Most think it is a Peterbilt or Mack that just glides off the road somewhere, collects some stuff, and then moves down the road a bit and off-loads it at someone's house. Off-highway trucks, or haulers or dump trucks or whatever you want to call them, are just what the name says--trucks that work off the road and really never get on the road.

These vehicles haul dirt or mining ore or sand or gravel or anything that needs

Haulers come in two different designs--articulated haulers and rigid haulers. The biggest trucks are rigid haulers. "Artics," as they are known in the trade, range in size from about 14 tons to 40 tons. Attics are typically found at construction job sites where dirt, rock, sand or other materials have to be moved from one location to another, sometimes short distances of hundreds of yards and in other instances as much as a mile or two. You will see these haulers at highway reconstruction job sites and sites where new shopping centers or tract housing developments are being constructed.

The market for articulated haulers was not very strong for a number of years, specifically during the period from 1998 through 2002. Then demand improved in 2003 and things began to look better for the suppliers. The real change came in 2004 when demand exploded, growing about 50%. No one saw this coming, and the manufacturers had a hard time meeting orders being made by customers. Today, we hear that some hauler customers are being told that deliveries will be six and eight months away. Boom or bust!

Caterpillar is the leader in the artic market, taking over first place in 2004 from Volvo, which had been the market leader in North America for decades. Volvo phased out production of its attics in North Carolina in mid-2003, to source all of its trucks from Sweden or Brazil. However, demand jumped so fast in 2004, Volvo was unprepared and could not meet its dealers' order levels. Caterpillar, which produces its machines in the United Kingdom, was quicker last year to respond to the demand and nearly doubled its 2003 sales, and with that effort captured first place in the market. Other major players in this business include Terex, Deere, Komatsu, Moxy, JCB and Case.

Two companies--Komatsu and Deere--are now producing their articulated haulers in the United States. Both companies started producing machines early in 2005, Komatsu in Chattanooga, Tenn., and Deere in Davenport, Iowa. I think it will be but a matter of time until one of the other major companies steps forward to do the same thing. Caterpillar considered the idea a few years ago and even built a new factory dedicated to producing the machines. However, the company decided at the last minute to squash the strategy and maintain its one-factory production line in the U.K. As for Volvo, it may have a difficult time reversing its decision to stop producing in the U.S., which occurred in 2003. The factory in North Carolina is already filled with other machines that have taken up the space provided when the haulers exited.

The market for rigid haulers is largely driven by mining and commodity prices, as well as by quarrying activities. We all know how the housing industry has fared in recent years. Sand and gravel operations all over the land do well when housing is strong. With coal priced higher every day because of the rising cost of oil, coal mines have also been buying new machinery and copper and gold mines have been doing the same thing. As a result, rigid hauler sales to the mining industry were robust this past year, jumping more than 40% from 2003. Sales in 2005 are going to top the 2004 level.

Caterpillar is the perennial leader for rigid haulers. The company has been the top seller for these machines in North America and throughout the world for several decades. Other major competitors of the big trucks include Komatsu, Euclid-Hitachi, Terex, Liebherr and Rimpull. All of these companies produce their big machines in North America, while Komatsu and Terex both import some models from offshore factories.

I believe sales of these two types of trucks will continue to grow in 2005, then slacken somewhat in 2006 as demand softens. It is very difficult in my opinion to expect much further growth in sales following a run-up in demand like we had in 2004, topped by additional strong sales this year in 2005.

www.yengstassociates.com--cyengst@yengstassociates.com

CHARLES R. YENGST IS

PRESIDENT OF

YENGST ASSOCIATES,

WILTON, CONN.