TORONTO, Ont. -- While a slim majority of Ontario trucking company owners and executives remained optimistic about the industry’s overall prospects heading into the fourth quarter of 2012, confidence levels are slipping according to the most recent Ontario Trucking Association survey of business conditions in the bellwether sector.
The proportion of respondents who were optimistic about the industry’s prospects for the next three months dropped to its lowest level (52%) since the first quarter of 2010 and has declined in five of the last eight quarters. This no doubt reflects a weaker peak shipping season and the deteriorating outlook for the Canadian economy in 2013. Still, it must be kept in mind that the level of optimism – even though it is obviously softening -- is still much higher than it was during 2008 and 2009. Not surprisingly, the economy topped the list as the number one vote-getter (50%, compared to 38% in the 3Q12 survey and 25% in 2Q12) as carriers’ top concern.
A strong majority of respondents reported that freight volumes remained steady (about the same) as they were three months prior, although the share of those reporting a decrease in volumes, while still under 20%, were creeping up in each of the intra-Ontario, interprovincial and northbound US markets. The only market to buck the trend was the southbound US market which was sending out mixed signals. The largest proportion of carriers in that market (43%) said volumes were about the same. Thirty-seven per cent said volumes were decreasing. On a more positive note, the proportion of respondents who said southbound US volumes were increasing doubled from the previous quarter, but still only reached 20%. Compared to a year ago, 61% of respondents say that freight volumes in the Ontario trucking industry declined.
The softening in volumes does not however appear to have had a deteriorating impact on freight rates. In every market category the majority carriers reported that the freight rate environment was about the same as in the previous quarter and smaller proportion of respondents reported decreasing rates (in every market except northbound US). The most problematic market continues to be southbound US where about a third of respondents reported decreasing rates. But, even that compares favourably with the 3Q12 result of 40%. In the other three markets, carriers reporting a decreasing rate environment do not exceed 11%.
The majority of carriers (78% and 62%, respectively) reported that shippers were taking about the same amount of time to pay their freight bills as in the previous quarter and compared to a year ago. However, while still in a minority (20% and 28%, respectively) a somewhat greater proportion of respondents said that it was taking shippers longer to pay, which if it continues, could become a more worrisome issue. OTA asked some related questions in terms of payment terms in the 4Q12 survey. Almost all carriers said their payment terms were for 30 days. However, only 25% said they actually charge interest on invoices that are not paid on time.
Tight capacity appears to be holding. The proportion (15% vs 31%) who said that capacity was decreasing declined from quarter to quarter and the proportion of those that said capacity had increased rose from 15% to 23%. However, this was offset by a larger majority (63% vs 54%) who said that capacity in their segment of the trucking industry remained the same compared to the previous quarter. Compared to six months ago the proportion of respondents who reported that capacity had increased, remained the same (23%), but the percentage who reported a decrease in capacity actually jumped from 17% in the 3Q12 survey to 23%.
There was also some indication that more shippers may be locking in capacity. While most respondents (70%) reported no change in contract timeframes, there was an uptick (from 16% to 27%) in the proportion of respondents who said that customers were in fact lengthening the timeframes in contracts. (Only two per cent said timeframes were shrinking).
The industry continues to be disciplined in terms of adding capacity. Fifty-five per cent of carriers said they planned no net change in the number of drivers in their fleets over the next three months and a somewhat smaller proportion (43% vs 48% in 3Q12) said they planned to add drivers. Fifty-five per cent of carriers said they planned to add owner-operators (up from 50% in the previous quarter) – if they can find them – while 43% were not planning to add to their o/o ranks. The majority (61%) of carriers don’t plan to add to the net number of tractors in their fleets over the next three months. Forty-one per cent do plan to add more trailers (up from 36% in the previous quarter), but 11% plan to reduce their trailer pools and 48% plan to stand pat.