Viewpoint: Is Your Glass Half Empty or Half Full?
Many people in the industry have stated 2004 has been a difficult year.
Executive editor Ingrid Phaneuf summarized 2004 as an “annus horribilus” for truckers. If your Latin is a tad rusty, that means horrible year. Well, call me an eternal optimist, a “glass is half full” type of guy, but I beg to differ.
Not because I think Ingrid is off in her outline of the issues that have hurt trucking over the past year. As always, she’s right on the mark. I just happen to think that how the industry has dealt with its many challenges in 2004, and actually 2003 as well, is good reason for optimism. To use an old football analogy, we bent but we did not break.
Despite all the challenges of this year (rising fuel, border crossing, labour and equipment costs) and the year past (a series of economic shocks which basically wiped out logging in B.C. and cattle hauling in the Prairies and significantly hampered the Ontario economy), the average operating ratio for Canada’s for-hire carriers has remained steady at 0.95. That’s nothing to turn the heads of investors but, for trucking, it’s arguably considered healthy. Industry bankruptcies in 2003 (a tougher year than 2004) were down to their lowest level since 1990. The loss of small carriers and owner/operators, which had been exiting the industry in record numbers in recent years, has come to an end.
Topping the list of reasons truckers are able to turn a profit despite all the financial body blows, is the distinct upturn in freight volumes. And I expect those volumes to stay high right into 2005. Canadian companies can’t live off their inventories if they want to meet expected demand, so truckers will be kept busy replenishing their stocks.
Not only is there more freight to move but shippers are finally paying better rates to move it because they’re rightly concerned about the shortage of capacity caused by the exodus of small carriers and owner/operators the past handful of years. In fact some shippers are becoming so concerned the shortage of capacity could leave them with goods stranded at the dock they are signing longer-term contracts.
In similar economic growth situations in the past, the industry proved to be its own worst enemy with so many new carriers and owner/operators flooding the market they ended up depressing rates. I don’t think that’s going to happen this time. The barriers to entry are much higher than before and carriers are being much more careful in adding to their own capacity. Class 8 truck sales for the first eight months of 2004 may be up 42 per cent ahead of the past year’s, but truck OEMs figure a good 95-99 per cent of the trucks they’re selling are for replacement, not growth, purposes.
Rising costs are a concern. Truck prices have gone up as truck OEMs and their suppliers have had to pass on at least some of their own steel price cost increases. But I think it’s fair to say no trucker paying a higher price is feeling gouged.
The legislative situation is also looking better. U.S. government officials finally seem to be learning that working with industry produces better results than working against it. Their willingness to practice “informed compliance” for a “reasonable period of time,” when enforcing the new requirements for BRASS shipments at the border, is the latest indication of this approach.
Put it all together and I think 2004 could actually be considered an “annus magnificus.”
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