Slipping shipment volumes taking bite out of rate increases
March 1, 2007
Slower economic growth on both sides of the border is having a measurable impact on shipment volumes. For the past three years more than 60% of shippers reported double-digit increases to their shipme...
Slower economic growth on both sides of the border is having a measurable impact on shipment volumes. For the past three years more than 60% of shippers reported double-digit increases to their shipment volumes, according to our annual Transportation Buying Trends Survey. For 2007, however, only 49% of shippers were expecting double-digit increases. The impact of lower shipment volumes is having a clear impact on trucking rates. Whereas back in 2004 and 2005 more than 80% of shippers reported increases to their freight rates, rate increase penetration was down to 64% in 2006 and only 59% of shippers expect higher truck rates for 2007. (Our annual Transportation Buying Trends Survey, conducted by our sister publication Canadian Transportation & Logistics in partnership with the Canadian Industrial Transportation Association and CITT, includes the participation of more than 700 shippers across Canada.)
That’s the average increase in costs experienced by Canada’s largest for-hire carriers (companies earning $25 million or more annually) in the last quarter of 2006 compared to same quarter the previous year. Average per-carrier revenue increased only 2.3% from the fourth quarter of 2005, according to Statistics Canada data.
The top 91 for-hire carriers generated operating revenue of $2.4 billion and operating expenses of $2.3 billion in the fourth quarter. The top for-hire carriers’ operating ratio (operating expenses divided by operating revenue) stood at 0.94 in the fourth quarter compared to 0.93 in the same quarter of 2005.
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