Expect higher transportation pricing in years ahead: Cormark’s Newman
TORONTO, Ont. – The potential for synchronous global growth could ignite demand for transportation, leading to higher carrier pricing, a recovery of profitability, and the potential for industry consolidation, according to David Newman, a transportation market analyst with Cormark Securities and the luncheon speaker at today’s CITT conference.
Surface transportation volumes have actually been relatively sluggish with the railways realizing modest growth, although above GDP, and the TL and LTL trucking segments suffering declines. But motor carriers have done a “phenomenal job at cost and capacity management and their balance sheets are in excellent shape,” Newman said.
There have been areas of strong performance in the niche/specialized markets, such as bulk/tank, heavy haul and oilfield services.
“And everyone is expecting the fourth quarter and into next year to start looking better,” Newman added. “Truck tonnage and our tracking of various indices seem to point toward an emerging recovery in volumes.”
Newman said a variety of factors could lead to above average growth for carriers in the years to come. Europe’s economy is turning the corner at the same time as the US economy is improving and the Chinese economy is stabilizing at a lower but still robust growth level, Newman said. India is continuing to develop and Mexico is gaining momentum. He is expecting global growth around 3% next year.
Canada stands to profit from such synchronous global growth, Newman said, because it has the base metals, energy products and agricultural products required to feed the demand of an expanding world economy.
The inventory to sales ratio is also in balance so if there is an increase in demand there should be an immediate impact on freight volumes.
“It won’t be a dead cat bounce. It will be the real thing,” Newman ensured.
Canada’s West Coast ports are also doing well, and considerably outpacing their US counterparts. Containerized traffic for the three largest US West Coast ports has grown just 2% YTD while Canada’s West Coast ports are experiencing 18% growth YTD.
Newman said the driver shortage, the new US hours or service, and demographics could also lead to higher pricing in the trucking sector as capacity is curtailed.
“We are actually seeing the acquisition of companies just to acquire drivers,” he said.
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Let’s hope it comes soon we all could use a raise!
Many trucking co.(S) have trucks parked and drivers will go back to truck driving if the rates allow us to pay the drivers fairly. In 1981 a truck driver (1981) made 2 times the min. wage plus overtime after 44 hours. Very few co.(s) are paying at those levels today. In 1981 a house cost 50,000 that same house 40 years older would be $300,000. gas was $.27 per l today $1.30 A local truck driver working 4 days(50 hours) made $24,000 per the same as teacher or RNA. or a firemen. Today the teacher would make $67,000 the RNA $65,000 and the firemen $77,000 and the truck driver $43,000. I was getting $50. per hour( with my own tractor) 10 years ago doing city work fuel was $.60 per l today fuel is $1.35 per l. with one third going to the driver.T would need to make $62. per hour to pay the driver $21. I am being offered $42. per hour today Blyth Ont