TORONTO, Ont. - There was a saying making the rounds at the recent Ontario Trucking Association (OTA) convention that may serve as an unofficial rallying cry for the Canadian trucking industry as a wh...
TORONTO, Ont. –There was a saying making the rounds at the recent Ontario Trucking Association (OTA) convention that may serve as an unofficial rallying cry for the Canadian trucking industry as a whole: “We’re at a point in time, not the end of time.”
For the carriers and owner/operators who survived 2009, trucking conditions can only improve in 2010 right? While nobody’s making any promises, the general consensus seems to be that the coming year will hold moderately better things for the industry.
“Carriers should be positioning themselves to take advantage of the turnaround when it comes,” David Bradley, president of the OTA and CEO of the Canadian Trucking Alliance recently suggested.
Citing evidence gathered from the most recent OTA Quarterly Business e-Pulse Survey, Bradley said optimism is beginning to return to the trucking industry.
“The optimists clearly outnumber the pessimists now,” he said, before tempering that remark by adding “while there has been some improvement in volume, the outlook is still shaky, confidence fragile.”
Our own nationwide survey of motor carrier executives completed at the end of November found that 40% of motor carriers believed freight volumes would grow in 2010, compared to just 19% who felt likewise at the same time last year. Only 10% felt freight volumes would decrease, compared to 42% who felt likewise at the same point the previous year. Survey respondents rated their degree of optimism for their company’s growth at 5.6 on a scale of one to 10, an increase from the 5.1 rating they provided the previous year.
The trajectory of the Canadian trucking industry’s recovery may be largely influenced by the ability of the US economy to get back on track and the willingness of the Bank of Canada to keep the Canadian dollar in check so our exports continue to appeal to our largest trading partner. However, there seems to be lingering doubt about the US economy’s ability to bounce back.
John Larkin, managing director transportation with Stiefel, Nicolaus and Co., speaking about the US economy at the recent OTA convention, had this to day about the US economic outlook: “Maybe when the snow melts we’ll see some greenshoots.”
And at the same event, Meny Grauman, executive director and senior economist with CIBC World Markets, described the US economy’s 2010 outlook this way: “A pop and a fizzle.”
While he believes the recession in the US, as with Canada, is over and third quarter growth this year is strong thanks to the impact of Washington’s unprecedented economic stimulus, Grauman believes the US will find itself in a “slow crawl” out of the recession overall.
A lot has to do with the hit the US consumer has taken, Grauman said, adding that US incomes are continuing to contract as is consumer credit.
“Their incomes are dropping, their access to credit is shrinking. They got burned living off credit and they’re not in a mood to shop,” Grauman said. “The US consumer is very resilient. It is always dangerous to declare the US consumer down and out but sometimes you can get hit too hard.”
One of the biggest questions in 2010 will be whether carriers can restore trucking rates that took a wallop last year. Average rates in most lanes took a hit in 2009, according to the Canadian General Freight Index developed by Dr. Alan Saipe, president of Supply Chain Surveys on behalf of transportation management provider Nulogx. Between December 2008 and July 2009, domestic truckload rates dropped 4.1%, cross-border LTL rates plummeted 21.4%, cross-border truckload rates fell 4.4% and overall trucking rates were down 5.6%. (Only domestic LTL rates increased, and that was a meager 1.8%).
“In 2010, supply and demand should be in better balance, setting the stage for rate adjustments,” predicted Bradley.
His prediction is echoed by Nulogx, which estimated rates would bottom out in fall of 2009 and grow through the end of 2010.
“We expect that average ground freight costs will be about 4.8% higher in 2010 than they were in 2009,” Saipe’s recent forecast read. “Our projections show that this year-over-year increase may be as low as 1.6% and may be as high as 8.1%, depending on how quickly the world, US and Canadian economies grow.”