Looking forward to 2017

by Derek Clouthier

CALGARY, Alta. – “I’ll start off by saying that we’re in the trucking business, and as such, we’re eternally optimistic, because you have to be,” Trevor Fridfinnson, COO of Bison Transport, told Truck West with unabashed confidence.

If there was mantra the trucking industry could call its own when it comes to predicting how any coming year will go, this would be it – optimism…or better described as ‘cautiously optimistic.’

But there is an underlying level of ambiguity in many parts of Western Canada.

Susan Ewart, executive director for the Saskatchewan Trucking Association (STA), said the association’s outlook for 2017 is not an optimistic one.

She attributed her pessimism to what she said was the current state of the provincial economy, with an $803 million deficit.

“Small carriers are impacted by economic changes,” Ewart said, “and I believe we will continue to see a contraction in the industry with more amalgamations and or acquisitions.”

Ewart, who took over as executive director for the STA in April 2016, said there are negative economic factors from the province’s resource sector, and with nothing moving, companies are not transporting goods.

“It is a concern because if the industry continues to shrink we (will) see higher unemployment and more companies either selling or shutting down,” Ewart said.

But not all is doom and gloom in Western Canada; some are seeing the glass being half full…even in Alberta, where the glass has seemed to be empty for some time.

“Early indicators lead us to believe that there will be positive growth in the trucking sector in 2017,” said

Alberta Motor Transport Association president Lorraine Card. “But while we expect growth, we don’t know the rate of growth due to the vulnerability of the energy sector.”
Card said expected development in the Fort McMurray area, and in and around Grande Prairie with the possible expansion of natural gas fields, would both bring a positive impact to the province’s economy.

“However, the Alberta government is set to introduce a 5.35-cent per liter carbon levy affective Jan. 1, 2017, and an additional 2.68 cents in 2018,” Card pointed out. “The eight-cent per liter increase will add significant cost to the transportation industry in an already challenging economy, risking investments and jobs of hard working Albertans.”

Gene Orlick, owner and president of Orlicks Inc. and chairman of Canadian Trucking Alliance, said in the current economic climate, consolidation and acquisitions have become a common occurrence.

“I would expect it to continue in 2017,” Orlick said, “especially if the economy remains stagnant and larger fleets look to grow their footprint, while some smaller fleets without a succession plan choose to cash out rather than continue grappling with rising costs.”

Moving east to Canada’s most eastern, western province, Terry Shaw, executive director of the Manitoba Trucking Association (MTA), said they are always looking or growth in the industry, but he doesn’t see anything indicating that it might happen in 2017.

Despite his trepidations, Shaw remains hopeful.

“We are optimistic about some changes we’ve seen recently under our new provincial government,” he said, “but how significant or immediate any impacts that might arise from that is something I’m not certain of at this point.”

Shaw said the MTA is eager to hear from the newly-elected Brian Pallister Conservative government about the province’s plan for carbon pricing.

“This is an item with obvious impact on our industry,” Shaw said. “Environmental policy can enhance economic activity or it can slow it. The Manitoba government is well aware of the tools our industry has suggested on this front.”

Staying in the ‘Land of 100,000 Lakes,’ Bison COO Fridfinnson said his cautiously optimistic view for 2017 comes from the fact that the trucking industry has seen some ‘pretty restrictive forces’ in 2016.

“Growth has been harder to come by,” said Fridfinnson, “and certainly call it sustainability of pricing has been even more difficult, particularly in Western Canada. But that being said, we’ve been able to grow our business modestly this year and think that we can do the same in 2017.”

Fridfinnson said economic indicators are pointing toward positive growth for 2017, especially for Western Canada.

“Most economists are on the belief that we are either at or coming out of the bottom of the cycle as it relates to energy and the economy as a whole.”

He added that most people who are involved in transportation and are tied into consumer demand, there will be an opportunity in 2017 to rebound from the lows of the previous year.

“The tempered demand, particularly in Western Canada, I think we really saw it come into play in 2016 and that was a little delayed from the initial impacts of the fallout of oil,” Fridfinnson said. “Once it finally did start to flow through the system and we had real human impacts, we saw demand soften, but we believe it is poised to stabilize and if not rebound modestly.”

Moving to British Columbia, attitudes in ‘The Pacific Province’ are loftier than in other regions of Western Canada.

“We were really fortunate in 2016,” said Louise Yako, president and CEO of the B.C. Trucking Association (BCTA). “For the most part, the British Columbia economy withstood the difficulties that other parts of Canada have faced.”

Yako went so far as to say that her province benefitted from the economic downturn in Alberta, in that many who left her province to find work in Alberta during the most recent boom, returned to B.C. for employment, helping the economy and local businesses.

“I’ve heard from many carriers that they’ve had lots of choice and lots of good choice in terms of candidates for jobs,” she said.

Yako has little concern that those who moved back to B.C. would migrate east once again to Alberta if the province sees its economy turn around in 2017, as she believes when people find quality employment and become comfortable, they don’t want to move for the simple sake of relocating.

“Unless there’s something that is really pulling them back to Alberta, then I think we’re going to be in a pretty good spot,” said Yako. “What might happen is that once people have come back to B.C., maybe some of them chose jobs because they thought they should take whatever was available and then they start looking around; there might be some turnover based on that, but I don’t know that will necessarily be people losses due to (some) going back to Alberta.”

Yako said local economists expect B.C. to continue doing well in 2017, and even slightly better than the year prior, with an anticipated economic growth rate around 1.7% to 2%, especially if some of the natural resource projects the province is advocating for move forward in the coming year.

“I think B.C. will do well in 2017,” she said. “Slight growth, nothing dramatic, but we won’t be going backwards.”

The BCTA has a lot of ‘irons in the fire’ when it comes to recommendations and requests to the provincial government, explained Yako – electronic logging devices, changes to wheel base and pilot car requirements – and are hopeful a lot of decisions will get made in 2017 that will be favorable to the trucking industry.

“That’s really what I’m looking forward to in the next year,” said Yako.

Surprises from 2016

Last year did hold a few surprises for some in the trucking industry, including STA executive director Ewart, who echoed what many others saw in 2016.

“I believe the companies in our province did a good job of managing the downturn in the economy and that they continue to look at ways to diversify their operations to ride out the recession,” Ewart said.

Yako saw the same kind of resilience in B.C. , saying, “I think that’s really a testament to the fact that our economy has really become more diverse. We’re less reliant on specific sectors, so that helped us out quite a bit.”

Shaw said the trucking industry in Manitoba mirrors the provincial economy, and that his province is much less ‘boom or bust’ relative to some neighboring regions to the west, which he believes translates to Manitoba’s trucking industry.

From a company standpoint, Fridfinnson said he is proud of Bison’s performance in 2016, and its ability to maintain a modest growth trajectory.

What surprised him, however, was the volatility of certain market places in 2016, and how demand and pricing altered so rapidly in those corridors.

“One corridor I would highlight as being under particular pressure is between Alberta and B.C.,” Fridfinnson said. “It’s a big corridor in the West and demand has really changed. You can cite different levels of import activity, different levels of consumer demand in certain locations, but there’s less demand coming out of Vancouver heading east the market has been volatile as a result.”

In Alberta, with the fall of oil and gas prices and an overall reduction in that sector’s workforce, there were a number of people with Class 1 license who returned to the transportation industry, which Card said lessened the impact of the driver shortage.

However, that could change quickly.

“The longer the downturn lasts, the harder it will be for the trucking industry to recover,” Card said.

The Trump effect on Canadian trucking

The election of Donald Trump in the US, who will take over as president Jan. 20, 2017, may have come as a shock to some – including Donald Trump himself – but it will be a reality for at least the next four years.

Fridfinnson said Bison has discussed Trump’s election as a business, and they adhere to the ‘cautiously optimistic’ mantra so many in the industry embrace.

“As everyone is trying to forecast and assess what this presidency is going to mean, lots of rational people are trying to comprehend so many irrational statements,” Fridfinnson said. “So there’s lots of varied opinion on it. Ours is a belief in the strength of sound business relationships that have been established between the countries over a lot of years. Although there’s protectionist language that comes to some degree, we’re hopeful that the validity of the business relationships that do exist are going to be able to persist through that.”

Shaw said the rhetoric got ramped up pretty intensely during the US presidential election, but the MTA is going to wait and see what actually occurs during the Trump administration.

Ewart concurred, saying the STA view the election results as a ‘wait and see’ issue, as it is too early to make assumptions on what will happen.

Card said there is no way of knowing what impact a Trump presidency will have on Canada’s trucking industry until any changes to agreements are followed through with.

“While we don’t foresee any major policy changes within the Federal Motor Carrier Safety Administration,” Card said, “it is uncertain if there will be an impact from the US Customs and Border Protection with regards to border crossings.”

Many at the BCTA are confident that much of what was said during the campaign will be quite different now that Trump has been elected.

“Any worries we might have had have really moderated,” Yako said, “given (Trump’s) statements and the decisions he’s made since he was elected.”

Yako pointed to the North American Free Trade Agreement (NAFTA) as an example of an issue Trump has seemingly backed away from since being elected.

“I think a lot of that was campaign rhetoric,” Yako said, “and given the fact that he seems to be walking back a lot of the very extreme statements he made during the campaign, I guess people are moderately hopeful that things will go well.”

Though many take the ‘let’s wait and see approach’, Orlick is slightly more forthcoming.

“Love him or hate him, soon-to-be President Trump will supposedly have a much friendlier approach to fossil fuels and pipelines than the current administration, which would spur investment in the oilsands,” Orlick said.

He added that only time will tell whether there will be an immediate impact to Trump’s ‘friendlier approach’, but said removing some of the recent hostility toward the sector would be a good start.

Orlick believes that a US president who looks favorably on the oil and gas sector, coupled with the potential of a tightening world supply from the Organization of the Petroleum Exporting Countries (OPEC), would only benefit the western Canadian economy.

“If the overall western economy improves,” he said, “trucking improves.”

Trump’s anti-free trade rhetoric during the campaign is something that troubles Orlick, particularly those that have been beneficial to Canadian exports.

“There have been numerous reports that he will adopt a more protectionist attitude toward Canadian softwood lumber and livestock,” Orlick said. “If true, trucking companies that move these products would be collateral damage.”

Orlick said NAFTA, something Trump has eluded needs to be re-negotiated, is vital for both Canada and the US.

“We have already seen the markets react favorably to Trump’s election, so there’s reason to be optimistic,” he said. “If this rally continues through 2017, with our marketplace being so tied to the US, it bodes well for demand in trucking services.”

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