TORONTO, Ont. — Ontario carriers continue to be optimistic about freight volumes and rates, though their enthusiasm has subsided slightly since earlier this year, according to the Ontario Trucking Association’s Q4 survey of business conditions.
The OTA reports its members’ opinions on the North American freight environment “remains buoyant, albeit somewhat tempered from the unprecedented highs expressed in the last Q2 survey.” However, OTA added “There is clearly a sustained level of optimism in the air and the post-recessionary skepticism that hovered for years over the industry is in the rearview mirror for most carriers.”
Here’s how Ontario fleet executives characterized market conditions in the fourth quarter survey:
Forty-seven per cent of respondents said intra-Ontario freight volumes improved in the past three months, up 6% from the Q2 survey.
Carriers reporting a decrease in volumes within Ontario sank to an all-time low of 3%. Intra-provincially, carriers who say volumes increased were down 6% from the last survey but it was still the second best response since 2011.
Reports of increased freight volumes for southbound US lanes were down by 10%, OTA reports but at 55%, it’s still double the rate of carriers who said the same thing a year ago in the Q4 2013 survey, and five times more than the end of 2012. For the second straight survey, no carriers reported a decrease in US volumes, indicating they’re benefiting from a strengthening US economy.
Thirty-eight per cent of carriers reported stronger northbound US freight volumes, down from 62%.
Looking ahead, 29% of carriers expect improved volumes over the next six months, about half the number who said the same in the last survey. Only 3% said they expect less freight demand.
Within Ontario, 45% of respondents said they expected price increases, marking the highest level ever recorded and a 14% increase from the last survey.
No responding carriers said they expect rate decreases either within Ontario or throughout the other provinces. Thirteen per cent of carriers said they expect to see softer rates northbound into Canada while 33% expect to see increases.
The effect of sustained volume increases along with a worsening driver shortage continues to squeeze capacity, OTA reports.
Expectations remain largely unchanged for 45% of respondents, but only 27% have experienced capacity increases over the last quarter. Looking ahead, 84% of carriers either don’t expect change (42%) or expect further tightening (42%). Still, 82% say customer contract timeframes are not lengthening, despite all the warnings of driver shortages and documented shipper concerns over truck service availability.
On that note, most carriers (59%) insist they plan to add drivers; although, if recent trends are any indication, the majority of these additions are motivated by replacement demand, not expansion.
The challenge of maintaining capacity levels is leading many carriers to increase wages for drivers, adding to what is already their largest cost. In the Q4 2014 survey, 78% indicate driver pay is rising with about 10% of those respondents reporting raises in the 10% range – more than the previous high in 2011.
It’s also clear that next generation, clean emission trucks and all the added safety and environmental technology is increasing the cost of new equipment. More than two-thirds (71%) of carriers report truck price hikes in the 5-10% range – a steep ascension from the 42% who said the same thing this time last year, OTA reports.
Fuel remains a huge expense (about nine in 10 carriers report increases of some sort).
The driver shortage prevails as the top concern for carriers (55%). Capacity/rates was the second-highest reason for concern (21%). Only 18% stated the economy was their number one reason for alarm, nearly half as many (30%) who were most worried about the economy at the end of 2013.
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