A sold out crowd attended the 2014 Surface Transportation Summit at the Mississauga Convention Centre on October 15. This year’s conference had 30 speakers and panelists and two networking tracks. While I was not able to attend all of the tracks, here are some of my key takeaways from this year’s sessions on Trends in the Economy and Trucking.
The 2015 Economic Outlook track featured a leading economist and transportation equity analyst along with two trucking company executives. Despite the recent turbulence in the stock market, Carlos Gomes, Senior Economist with the Bank of Nova Scotia, highlighted that the US economy is trending positively and expects this momentum will carry into 2015. Mr. Gomes stated that U.S. and Canadian household balance sheets are in their best shape in some time as interest rates remain low and energy prices have trended lower. In terms of economic activity, orders for manufactured goods in the U.S. have picked up and the number of backlog orders is at the highest level in years.
In addition, annual automobile sales are above 16 million units and will likely remain at elevated levels due to the average age of cars in the U.S. and Canada. Exports are also trending upwards in Canada and should be sustained by the low Canadian dollar and the fact that the U.S. remains Canada’s largest trading partner. This combination of variables suggests that Canada will benefit from the strong relationship with the United States. Mr. Gomes expects GDP growth in Canada of 3.5% this year and 4% next year.
David Newman Equity Research Analyst, Cormark Securities, noted that regulatory changes in the U.S. and driver shortages are leading to pricing improvements in the trucking and rail sectors. These shortages are pushing spot and contract rates upward. Looking at the PMI (Purchasing Manager’s Index) and ISM (Institute of Supply Management) indices, there is momentum in freight volumes. This could support healthy freight activity through the first six months of 2015. Truck orders are back to 2006 levels that reflect the confidence in the economy. Truckload carriers are consolidating with TransForce and Celadon making major acquisitions. Mr. Newman expects more consolidation in the Canadian market but he also expects the truckload division of TransForce to be spun off.
Mark Seymour, President, Kriska Holdings Limited, talked about the “discipline” and technology that Kriska employed to drive improved pricing and profits. This discipline has allowed his company to have a good “run rate” over the past few years. Driver wages and the treatment of drivers are keys to future growth at Kriska. Mark highlighted the requirement for short term (one year) pricing with long term commitments (“annual pricing conversations”).
Mark observed that the Americans are coming to Canada. It is important to build scale against an American incursion. Shippers are currently more interested in talking about capacity rather than price. He spoke at some length about his joint venture with the Mullen Group and noted that Kriska/Mullen are planning to make acquisitions that will produce more capacity and build more scale. He also noted that there has never been a better time for truckers to look at costs and yields so as to make sure your business is healthy. Mark identified three values that are at the core of the two companies. They are “Profitable, Disciplined and Safe.”
Patrick Cain, Vice President, Business Development, Cain Express and Titanium Transportation Group, has seen increases in volume and his company is focused on taking advantage of opportunities that have “healthy” margins. He also spoke about his company’s acquisition by the Titanium Group and noted the advantage of joining forces was not just increased capacity but the ability to offer a broader range of services than were previously available from Cain Express. The attraction of being acquired by the Titanium Group was that they had the vision and resources to make the strategy work. He noted that he expects to see more small to medium sized companies being integrated into larger companies that can provide more size and scale.
The Executive Panel then focused on business strategies to move their firms ahead in the years ahead. Rob Penner, EVP and COO of Bison Transport, mentioned his company’s efforts to attract drivers through both higher pay and incentive pay. He also highlighted the need to manage costs effectively and make sure that revenue models relate to current market realities.
Ian Murray, Managing Director, Intermodal Marketing, CP Rail, spoke about the expectation that the driver shortage in North America will likely have a positive impact on Intermodal volumes. CP Rail has been making major investments in operating efficiencies (e.g. train speeds, train weights) and terminal improvements which are designed to increase business volumes.
Finally, Doug Harrison, President and CEO, Versacold Logistics talked about the challenges in the temperature control sector of the logistics industry. He specifically touched on the increasing complexity of the business, the globalization of supply chains and the increased use of technology in this sector of the business. These are some of the key trends to watch over the next year.
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