TORONTO, Ont. - Carriers are in for some short-term pain early next year as their costs increase just as freight volumes start to flatten, according to market researcher Martin Labbe."Fuel, wages, ins...
TORONTO, Ont. – Carriers are in for some short-term pain early next year as their costs increase just as freight volumes start to flatten, according to market researcher Martin Labbe.
“Fuel, wages, insurance – those three items will cause carrier costs to increase by nine per cent or more next year. Sixty per cent of carrier operating costs will face increases in excess of 15 per cent next year,” Labbe told fleet managers attending a seminar on trucking trends at the Ontario Trucking Association’s annual convention.
Labbe said fuel prices will take the biggest bite out of the bottom line but wages and insurance will also hit carriers hard. He said the need to retain drivers in a tight labor market will drive wage increases up another 10 per cent while insurance rates in Canada will rise seven per cent. (He predicted a 20 per cent increase in insurance rates for U.S. carriers over the next three years).
Meanwhile, the robust freight volumes the industry has been enjoying will start to dissipate as consumers trying to cope with fuel expenses Labbe predicts will be 30-40 per cent higher than last year’s and rising interest rates cool their ardor for new product purchases.
Labbe pointed to the already slowing demand in the U.S. for automobiles, a key concern for Canadian carriers transporting Canadian-produced cars south of the border.
“We are going into a turn. The question is how long will it last?” Labbe said adding he thinks the economy will be able to pull out of its slump by the middle of the second quarter.
“It’s not a point of doom and gloom. It’s a case of which freight do you accept,” he said urging carriers to rid themselves of unprofitable accounts.
Labbe also said that in the past when dropping revenues have coincided with increased costs, the resulting cost containment has come out of the maintenance area.
That is another key concern for the nation’s carriers considering the increasing government pressure to raise the bar on safety issues. n
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