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Truckers should soon return to driver’s seat when it comes to rates


TORONTO, Ont. – Economic growth will accelerate and impending regulations should give carriers the ability to increase rates next year, according to speakers at the Surface Transportation Summit here Oct. 13.

Carlos Gomes, senior economist with Scotiabank, predicted global economic activity will strengthen in 2017, as will GDP growth here in Canada.

“Canada and the US will see increased growth in 2017,” Gomes said. “It will be a little bit stronger than what we’ve seen.”

He also said emerging markets, including hard hit Brazil, should also fare better next year. Gomes said consumer spending is helping to offset a dearth of business investment. However, with an inventory cycle showing signs of recovery and oil prices returning to levels where investment is viable, Gomes said the overall economy and business investment should strengthen.

“As we move into 2017 we will start to see business investment in the oilpatch begin to improve modestly,” he said.

In the US, Gomes said the job picture is “very healthy” with growth of 2% year-over-year. And consumers there are spending less of their money on energy and debt – a record low of 13.5% of their income, compared to 19% in 2007.

“This is one of the reasons we think the US will do quite well going forward,” Gomes said.

In Canada, manufacturing levels are increasing, but that’s been mostly driven by the auto sector, Gomes explained.

“Outside the automotive sector, we have not seen much improvement,” he explained. “Our expectation is, as we see demand strengthen in the US we will see a broadening out of manufacturing activity.”

Gomes is also encouraged that oil supply and demand are coming in line, which should support oil prices at about $55 per barrel next year.

“This will help Alberta and Saskatchewan stabilize and move from negative growth to seeing some small increases next year,” he said.

John Larkin, managing director and head of research with Stifel Financial Group, gave Surface Transportation Summit attendees an economic outlook specific to transportation. Larkin noted spot market rates have fallen 10-20% over the past year, “to the point where many small carriers who participate in the spot market are really getting hammered and having trouble making truck payments.”

Contract rates began coming under pressure earlier this year.

“Anyone who is telling you their rates are up this year is probably telling you a fib,” Larkin suggested.

But that could be short-lived.

“Going forward, we think with all the regulations coming down the pipeline, we will see a tightening of supply and demand as 2017 develops and by mid-2017 we should be back into an up-cycle on pricing, provided the economy continues to click along at at least 1.5-2%,” Larkin predicted.

One big driver will be the mandate for carriers to use electronic logging devices (ELDs) to manage driver hours-of-service in the US, beginning in December 2017. Larkin said this could remove 3-5% of trucks from the road.

“It’s top of mind for everybody that 50% of the industry has ELDs, the other 50% does not. They’re still using manual logs. What you find is many of those companies using manual logs are in the 600-mile length of haul range, which you can’t do with a solo driver,” Larkin explained. “When they convert over to ELDs their productivity will be down 6-10%. So, 50% of the industry down 6-10% implies 3-5% of capacity will come out of the industry. That assumes all the small carriers will be able to survive. We think quite a few will exit the industry so it could be worse than 3-5% when all is said and done and the dust settles.”

Larkin said there are “enlightened shippers” who see this coming and are working to lock in rates, and “Neanderthals” who are focused solely on price. Another factor that could drive up rates is the inventory glut is showing signs of easing. “That inventory glut is being drawn down somewhat,” he said.

As volumes increase, a lack of quality drivers will limit the industry’s ability to add capacity, Larkin noted.

“Drivers are still very difficult to find,” he said. And he offered little hope that drivers will start flocking to the industry. “It’s tough to find those people who are willing to sacrifice their lifestyle to be out on the road.”

In order to micromanage their cost structures, Larkin said fleets have removed any freedom and autonomy from a line-haul driver’s job. Their carriers tell them how fast to drive, which route to take, where to fuel up, how much fuel to put in the tank and even when to take their breaks.

“They are told what to do every minute of the day while living in a little metal box hurtling down the highway at 63 mph,” he said.

Larkin predicted that between the second quarter of 2017 and Q2 2018, there will be a return to the environment seen in 2014, when there was more freight to move than there were trucks to move it, “and the spot market will go from being godawful to being quite attractive.”

Asked what smart carriers are doing to succeed in the future, Larkin said they’re diversifying.

“Diversify across a range of related services so you can offer your customer asset-based truckload, intermodal, dedicated fleet and truck brokerage to handle the peaks in volumes at the end of the month or quarter,” he suggested. “That seems to be resonating with shippers who like to purchase a lot of services from the same core carrier.”

He also suggested collecting and analyzing data so that troubling trends can be identified and corrected early.


James Menzies

James Menzies

James Menzies is editor of Truck News and Truck West magazines. He has been covering the Canadian trucking industry for more than 15 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.
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3 Comments » for Truckers should soon return to driver’s seat when it comes to rates
  1. Rick says:

    Finally someone other than a truck driver is stating the truth and giving an accurate reflection of why truck driver is not an appealing occupation any longer. Ironically and sadly this accurate reflection comes from someone outside of the industry.

    John Larkin accurate describes the role: “It’s tough to find those people who are willing to sacrifice their lifestyle to be out on the road. They are told what to do every minute of the day while living in a little metal box hurtling down the highway at 63 mph. Fleets have removed any freedom and autonomy from a line-haul driver’s job. Their carriers tell them how fast to drive, which route to take, where to fuel up, how much fuel to put in the tank and even when to take their breaks.”

    Combine those negative aspects of the job with … Crappy Pay, No Overtime Pay Legislation, Little or No Benefits, Disrespect & Abuse from police and authorities, and sleeping in a tin box on the side of the road, … there is absolutely no excuse for industry officials or government representatives to whine and wonder why there is a shrinking pool of applicants for the job.

    At one time, a guy could justify being away from his family or not having a normal life as a truck driver because the money was above average for the time put in, and the opportunity existed for freedom and independence from more “structured” occupations.

    Well, industry officials, accountants and gov’t bureaucrats have taken every single one of those appealing aspects away from the job over the past 25 years, so there is absolutely NOTHING LEFT appealing about driving a truck. Except the truck itself. And with all their appeasements of the welfare sucking, tree hugging, tax loving, global catastrophe crowd, they’ll soon kill off the last remnants of what we knew to be a real American truck, and all that will be left to drive is a jelly bean shaped plastic piece of European disposable crap, that will hardly inspire any young man to climb up into and chase his dream.

    This past weekend I saw a driving school truck go by and my first thought was why in the world would anyone sign up for lessons to drive a truck anymore.

    Thank you Mr Larkin for being a non-driver and shedding the light and speaking the truth about what it is actually like trying to be a truck driver in 2016, and accurately describing several of the reasons that the job has little appeal anymore.

  2. Ernie Luke says:

    Now you have heard the rest of the store by Paul Harvey THANK YOU RICK

  3. billy says:

    Its no secret about the condition of the trucking industry. Shippers want freight moved “cheaper than cheap” and carriers have rising costs e.g. insurance, equipment purchase and repair and other expenses. Drivers are last in line to be compensated. Save yourself, get out of the industry and find a 40 hr/wk job doing something else and spent time with your kids and family…live happy and healthy.

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