TORONTO, Ont. -- Carriers participating in the Ontario Trucking Association’s (OTA) fourth quarter survey of business conditions reported improved freight volumes in three of the four lane segments, which are monitored by the OTA.
But with the peak pre-holiday shipping season all but behind them, carriers don’t appear as buoyant about freight or rate prospects in the early part of 2014.
Within the soft Ontario market, 33% of carriers reported improved freight volumes in the previous three months – a 10% jump from the 3Q13 survey and the highest mark since 2011, which is the last time at least a third of respondents saw volume increases. Those who report decreased volumes remain low at 13%.
Within the provinces, the 38% who indicated they experienced better volumes is the highest mark since 4Q11 and more than double the 18% in 4Q12. Only 6% reported decreased volumes – a third of the carriers who reported negative volumes in the last several quarters and the lowest level the survey has seen since early 2011.
The 26 percent of carriers who said volumes improved in southbound US lanes still isn’t anything to brag about (and is also an indication that the U.S. economy is recovering painfully slow). However, by post-recessionary standards, it’s the highest level of carriers reporting a boost in volumes since late 2011. Only 11% signaled lower volumes, compared to the 28% in the last two back-to-back quarterly surveys.
The one lane to take a slight step back was northbound US, according to respondents – 31% of whom reported volume expansions, down 10 points from the previous quarter.
However, with the fall shipping season in the rearview mirror and the ‘new peak’ spring still months away, carriers optimism about the near-term appears to be yielding.
Asked about their outlook for intra-Ontario volumes in the next six months, 26% expressed optimism, down from the 35% in the last quarter and 40% in 1Q13. There was very little change in opinion about the other three lane segments from the last quarterly survey, where about a quarter once again expect volumes to improve going forward and about two-thirds expect volumes to stay the same across the board.
Rate trajectory, meanwhile, remains very horizontal. For the second straight quarter, more than 70% report no pricing changes in intra and well as inter-provincially, indicating that at the very least there’s equilibrium across Canada. It appears that pricing stability is also a reality south of the border. For the first time since the OTA survey began in 2008, over 60% of carriers reported unchanged rates in back-to-back quarterly surveys for US southbound lanes. Once again, northbound US appears to have regressed, as only 8% of carriers indicate improved pricing – a three-year low – while 28% indicated falling rates, which is the highest level since 2009.
Clearly, the fragile underbelly of the Ontario and US economies combined with a lack of professional drivers entering the industry continues to keep capacity tight. Only 16% of carriers say capacity is increasing, lower than both the 3Q and 1Q surveys. The rate of carriers who say capacity isn’t budging has hovered around 60% all throughout 2013 – about 10% higher on average than in 2012. While there were slightly more carriers (25% compared to 14%) who anticipate there may be more capacity to spare over the next six months, the majority (55%) say they don’t expect any change for the first half of 2014.
Once again, there was a near identical split among carriers who indicate they plan to stand pat on their driver pool (48%) and those who said they would hire more drivers (46%) over the next three months. Not coincidently, this mirrored the carriers who plan to keep their fleet total unchanged (48%) and those who plan to add power units (46%).
Likely a reflection of tight capacity, there is in increase in the number of carriers who say their customers are opting for longer-term contracts. Nearly 30% report customers are lengthening terms – the highest level in a year nearly double the average who said the same in the other three 2013 surveys.
Equipment costs are rivaling fuel costs and labour as carriers’ biggest expenses. As usual, fuel costs (58% of carriers report higher prices) and labour (87% report wage increases – a 14 point jump from the last quarter) remain trucking companies’ top to operating costs, but 72% of carriers are indicating tractor price hikes – up 20 points since this time two years ago. It should also be noted that 77% report higher maintenance costs with over 50% saying costs are between 5-10% more.