Ontario trucking companies optimistic about next quarter: OTA survey

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TORONTO, Ont. — The majority of trucking companies in Ontario remain optimistic about their prospects for the next three months despite negative freight volume prospects, according to the second quarter business expectations survey conducted by the Ontario Trucking Association.

According to survey, 67% of carriers reported they were optimistic about trucking’s overall prospects for the quarter – the same number as in the first quarter survey. This is off the peak of 75% recorded in the 1Q11 survey, but significantly higher than the bare majority (55%) who said they were optimistic about the industry’s overall prospects from the 4Q11 survey.

Only a quarter of respondents reported improvement in intra-Ontario freight volumes compared to the last quarter –the same as reported in the first quarter survey. Pessimism for the immediate future grew with only 30% of carriers expecting increases in the latter half of 2012 versus 39% who were upbeat in the last survey.

Thirty-four percent of carriers reported current volume improvements compared to 21% in the first quarter. Fifty-nine percent of respondents said they expected improvement in inter-provincial freight volumes over the next six months (up from 40%). Only 3% predicted a decrease.

The number of carriers who said volumes had increased since the first quarter mirrored the 1Q12 survey at a meager 14%, while the majority (58%) said things were unchanged. However, the rate of carriers who reported decreased volumes rose from 21% to 28% – the first increase in pessimism in a year and the second-highest percentage of carriers reporting a retreat in volumes since the third quarter of 2009. While the majority of carriers continue to expect relatively little volatility over the next six months (65%), there was a modest a drop in the percentage of carriers who expect increases (23% – the lowest overall rate since the first quarter of 2009) and a small uptick in projected declines (7% to 12%).

Nearly half (48%) of carriers reported an increase in northbound freight volumes versus 30% and 35% over the last two quarters, respectively. Expectations for the balance of 2012 also improved with 40% of carriers reporting they are optimistic about northbound volumes for the next six months.

After about a year of modest rate improvements, the survey results indicate rates holding steady (particularly in the inter-provincial market), but “there is some softness creeping into those markets where volumes are weakest,” the OTA reports. Overall, more than half of carriers reported the current rate environment as being “about the same.” However, the percentage of carriers reporting the rate environment in the intra-Ontario market as decreasing rose to 28% from 23% in the first quarter. Forty-five percent of carriers characterized the southbound US rate environment as decreasing, up sharply from 28% in the first quarter survey. The environment for northbound rates continues to be the strongest with 43% of respondents saying it is improving, compared to 30% in the previous quarter. 

At the same time, carriers reported increases in all major operating costs compared to last year. Labour costs are headed upward, with 71% of carriers reporting increases in driver wages (compared to 45% in the fourth quarter of 2011) – most being in the 2-5% range. The percentage of carriers (36%) who reported increases in owner/operator compensation of between 2% and 5% also increased – up from 31% in the first quarter. Nearly 95% reported fuel cost increases over the past year with the majority (67%) reporting increases of 10% or higher (after 44% said the same thing in the first quarter). The costs of maintenance and tires are both on the rise with about 75% and 81% of respondents, respectively, reporting increases. Meanwhile, almost three in four carriers (73%) reported higher tractor-trailer purchase prices, with 24% indicating price increases of 10% or more (up from just 9% two quarters ago). As well, 67% of carriers say they’re paying more for trailers (25% say 10% or more), which is also up from only 45% six months ago. 

The majority of carriers who say capacity in their segment remained level increased from 43% to 55%. However, capacity remains extremely tight as only 22% report they’ve increased capacity (down from 27% last quarter and 33%-average throughout most of 2011) and just 28% expect they will expand coverage in the next six months.

Carriers continue to be cautious and resistant about adding to their driver pool, according to the survey. A minority (43%) of respondents said they plan to add more company drivers (vs. 46% and 49% in the last two quarters) while 52% said they have no planned changes. Similarly, 44% said they plan to add more owner/operators, slightly up from the 40% who indicated the same last quarter. Carriers, meanwhile, appear to be doing a good job retaining the drivers they do have with 75% reporting a turnover rate of 20% or less.

The vast majority (70%) of carriers said they will not increase the size of their tractor pool, but those who said they will add to their net number of power units actually fell to 22% from 31% in the previous quarter – the lowest level since the fourth quarter of 2009. The percentage of those who planned to add trailers also dipped (to 28% from 35% last quarter and 46% this time a year ago) while the majority (63%) indicated no change in trailer additions.

For the second time, the OTA survey asked carriers what are their top three major industry issues and/or concerns they’re watching closely. More than half of all carriers (52%) said the capacity-rate situation was their top concern, followed by fuel prices, the economy and the driver shortage as number one concerns.

Fifty-five carriers participated in the survey, which was conducted electronically in April.

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