Regional Outlook: Central And Eastern Canada Brace For Tough Year
January 1, 2009
TORONTO, Ont. - Most of the challenges facing the trucking industry in 2009 are national, if not global, in nature. However, each region in Canada faces its own unique challenges as well. From a loss ...
January 1, 2009
James Menzies And Carroll McCormick
ON THE PLUS SIDE: Long combination vehicles will be explored in eastern provinces, which could contribute to improved efficiencies for carriers.
TORONTO, Ont. –Most of the challenges facing the trucking industry in 2009 are national, if not global, in nature. However, each region in Canada faces its own unique challenges as well. From a loss of manufacturing in Ontario, to ongoing struggles with Marine Atlantic on the East Coast, truckers in every corner of the country will face their own cornucopia of challenges. Here’s a region-by-region breakdown for Central and Eastern Canada:
In Ontario, it will be a fight for survival in 2009, according to Ontario Trucking Association (OTA) president David Bradley. However, he tempered that prediction by pointing out those that do survive the current downturn will emerge stronger when the economy does rebound.
“The ‘perfect storm’ has become an over-used expression of late, but it describes what the trucking industry has had to endure over the past year,” said Bradley.
The slowdown in manufacturing, high fuel prices, a sluggish US economy and the surge of the Canadian dollar all posed problems for the trucking industry in 2008, resulting in excess capacity and imbalances in many lanes, Bradley pointed out. Unfortunately, he said the industry can look forward to much of the same in 2009.
“There have been some positive things happening of late -fuel prices have softened, the Canadian dollar is off its peak and capacity has left the marketplace. But things remain extremely volatile and the changes in the fuel prices and dollar are themselves a reflection of the slowdown in worldwide economic growth brought on by financial and credit market woes,” Bradley said.
The big wild card in 2009 will be the length and depth of an expected US recession, according to Bradley. He also warned Canadian fleets could be impacted by the global credit crunch.
“A lower (Canadian) dollar and softer fuel prices are helpful and would normally be greeted with more enthusiasm, but if our biggest customer to the south is not buying then it won’t make that much of a difference,” he said. “Given the fact that over 75% of Ontario’s merchandise exports go to the US, representing about a third or more of provincial GDP, we cannot help but be negatively impacted.”
Bradley warned that carriers with weak balance sheets could be vulnerable and more capacity reductions will be realized over the next few months, which should create a low capacity situation when the economy recovers.
“Carriers that are able to weather this difficult period will be in good position to take advantage of a low capacity situation when demand starts to pick up again,” said Bradley.
The US-caused economic crisis has come to roost in Quebec, and the way Marc Cadieux, president and director-general of the Quebec Trucking Association (QTA) reads it, 2009 is going to be a rough and tumble year.
“The winter and coming year will be very difficult. It is hard to tell you figures, because no carrier will ever call you up to tell you they are having trouble, but we all know that with this slowdown and expectations, times are tough. Things are not as low as they could get, but maybe in April or May, 2009 we can evaluate what the real economic situation will be.”
Tough enough, according to Cadieux, that some carriers are retiring trucks normally up for replacement and not replacing them. As well, he said, “A lot of fleets are trying to bring down the cost of their operations in the areas of fuel, logistics and more on-time delivery.”
Working against such efforts are the incredible number of infrastructure projects underway all over Quebec.
“This is a hell of a task. You cannot predict all the problems with all the detours. All of the big cities are surrounded by infrastructure projects. All of this has a big impact on operations,” Cadieux said.
Getting there is getting to be such a pain that there is talk about surcharges for delays.
“It came up in an executive meeting (recently) whether there should be a surcharge for these deliveries. The same as gas fuel charge fees were not part of the vocabulary seven to eight years ago, should there not be a surcharge for delays? It may not be so totally applicable now, but it is still in day-today discussion,” Cadieux reported.
On the positive side, the QTA is working hard with governments and organizations to empower fleets with, for example, more freedom to run Long Combination Vehicles (LCV).
“We expect to see progress on LCVs in 2009. Federal and provincial ministers want to open up the economic corridors as much as possible. The only hard player in the game right now is the Maritimes.
They are talking about compulsory lights higher up on trailers,” Cadieux said. “Everyone would be very happy to have this opened up with respect to labour, gas, reducing greenhouse gases.”
The QTA is also working with the federal and provincial governments to win tax breaks and subsidies, Cadieux added. “We hope we can get a certain reaction from them in the coming year. There are subsidies that soon will be available. It will be a first step. We are also working on getting help on training programs for companies and drivers, such as giving them more skills in economizing fuel. We are talking with Emploi Quebec. There will be major things. There is a limit to working on equipment. We have wide tires. We need the LCVs. We have to look at taxation so we can change the bottom line of companies.”
One possibility, although Cadieux was not specific, would be for Revenue Quebec to increase the capital cost allowance (CAA) for certain purchases, like it did a few years ago with a 125% CCA for computer equipment.
“We are having very open discussions with the provincial government,” Cadieux said. “Will anything happen? The openness of the discussions tell me that there will be very bad faith if nothing were to come at the end. The dialogue is very good but will they deliver a mouse or an elephant?”
When asked whether shippers might try to drive down rates, Cadieux warned,”If shippers break down this industry to the point where many companies have to (shut down) it could be tough for them in the next two to three years. Then carriers may really have a choice of which shippers they work for.”
Peter Nelson, executive director of the Atlantic Provinces Trucking Association (APTA), prefaced his predictions by saying “I prefer to be an optimist, rather than a pessimist.”
He said Atlantic Canada’s economy has been downtrodden for some time, so it may actually be somewhat sheltered from the current economic crisis.
“Here in Atlantic Canada, we’ve already gone through a lot of things,” he said. “We’ve had the collapse of the cod fishery, the collapse of the forestry sector -so we’re ahead of the curve.”
He said the industry will continue to struggle with a freight imbalance.
“Loads coming in should remain steady, but there’s nothing going out,” Nelson said.
He added there are some things to look forward to in 2009, including positive movement on the LCV front.
New Brunswick is currently in the permitting process and Nova Scotia is launching a pilot project which hopefully will pave the way for the widespread use of LCVs through the Maritimes.
Marine Atlantic continues to pose problems for the East Coast trucking industry, with old equipment frequently breaking down and leaving truckers stranded.
Nelson said he hopes the feds step up in 2009 and spend the money required to modernize the aging fleet.
Exacerbating the problem with Marine Atlantic’s fleet is structural damage to the loading ramp in Port Aux Basques, Nfld., which has resulted in a reduction of capacity and long lineups for truckers.
Nelson also hopes to see more funding for secondary roads and bridges throughout the Atlantic region and he worries the antics playing out in Ottawa may divert gateway- related funding from Atlantic Canada to Quebec.
“We do have concerns that with a coalition governmen
t, that we will not benefit,” he said.
The Atlantic Gateway concept continues to be a priority for the APTA in 2009, said Nelson.
“Gateway is something we continue to discuss -we’re very active in that file,” he said. •
“Carriers that are able to weather this difficult period will be in good position to take advantage of a low capacity situation when demand starts to pick up again,”