VANCOUVER, B. C. – It’s that time of year again: time to polish those crystal balls and see what the Canadian trucking industry has in store for the year ahead.
This year – more so than in any other year in recent history – industry insiders are painting a scary picture of what looms ahead.
B. C. outlook bad
The B. C. Trucking Association (BCTA) is perhaps the least optimistic about the potential for the trucking industry, when considering the prospects of 2009. Paul Landry, president and CEO of the BCTA believes it will be a struggle, especially with the potential for a full-on recession in the US, which he says will likely drag Canada along into what could become a worldwide recession.
“So, it really means that we’re all in for very, very difficult economic circumstances,” he predicted.
“I can see virtually every aspect of our industry being affected by this. International trade will be soft. We’re seeing that today. The volume of containers being transported to and from Canada has dropped quite a bit, so anybody associated with port activities is going to see a further decline in activities. Similarly, trade with the US, which has been declining for the last seven or eight years, will continue to deteriorate.”
About the only good news on the horizon is the low value of the Canadian dollar, according to Landry, which will make Canadian exports to the US more attractive.
Regionally, B. C.’s forestry exports continue to be constrained by the free trade agreement and the softwood lumber dispute, Landry pointed out.
“These are pretty much the worst times for the forest industry. As the price of lumber declines, it impacts the volume of lumber that’s allowed to be exported to the US,” added Landry.
“It’s likely going to be the worst year for Canadian trucking that we’ve seen in many years,” he concluded.
Alberta losing its lustre
Alberta has long enjoyed its own favourable economy, thanks to its vast resources – most notably oil. But Alberta’s trucking industry has experienced some adjustment lately, according to Mayne Root, executive director of the Alberta Motor Transportation Association (AMTA).
“Things appear to be slowing down to some degree, certainly not huge, but it’s noticeable,” he said.
One ongoing issue for the AMTA is a labour shortage, which may “balance out” with the tightening economy in 2009, said Root. The lower Canadian dollar is a concern in some respects, but Root noted that cross-border carriers should enjoy a trade advantage, despite the threat of a full-blown recession in the US.
“With the dollar change, it’s going to make it more attractive to buy products up here, and have them shipped down,” he pointed out. “So the industry is waiting to see what will happen there.”
Root is troubled by the environmental pressure placed on the trucking industry, such as the threat of a carbon tax. While carriers have made an effort to lessen the environmental impact of the trucking industry, a further tax on fuel is not the answer, suggested Root.
The industry has been an environmental leader with new technology, he noted. He also voiced displeasure with stricter engine emissions standards, which increase the purchase price for new trucks while also causing them to burn more fuel.
Root said that Alberta has hit its peak, and may “drop a bit,” but not substantially.
In comparison to other provinces and international markets, Alberta has a more sustainable economy, he said, and the AMTA is less concerned about international fluctuations in the market.
“The confidence here is still pretty strong. I’m feeling, anyway,” he said.
With much of Canada’s economy mired in a slump, Saskatchewan continues to reap the rewards of a strong resource-based economy.
That is, as long as there is a reliable fuel supply, according to the Saskatchewan Trucking Association (STA). That hasn’t been the case over the last few months, with three refineries shut down in Alberta due to planned and unplanned maintenance, a situation that had many STA members scrambling for fuel.
While fuel reserves have slowly returned to normal since early November, the STA remains concerned about possible future shortages in the year ahead.
“We’d like to see some form of contingency planning from the petroleum producers to ensure adequate supplies for trucking, in what we see as an essential service,” said Al Rosseker, executive director of the STA. “As we’ve said before for our industry: when the trucks stops, the economy stops.”
Otherwise, Saskatchewan continues to enjoy a booming resource economy, with 107 drilling rigs operating in the province. Other resources that continue to provide opportunities for the trucking industry include potash, uranium and grain, which all benefit the bulk transport sector.
“Obviously, when there’s a lot of commodity to start moving, it helps our industry,” Rosseker says. “Now, some of it gets railed, but the major portion of it is moved by truck, so that will help some of our carriers. The east-west stuff is picking up a little, but the north-south cross-border stuff (is slow), other than runs of produce and stuff.”
Industry profit margins remain slim and Rosseker indicated that not everybody in the trucking industry is enjoying strong revenues, and smaller operators are particularly vulnerable as shippers extend payment terms in light of current economic conditions.
“It puts the crunch on people,” said Rosseker. “Add a fuel shortage to the mix, and that just makes it awful. Again, we are expecting relatively good times in Saskatchewan. But that hinges on such things as: will these refineries in Alberta break down again and create another diesel shortage?”
The STA is optimistic about the provincial government’s ongoing plans to upgrade the highway system. Rosseker is also enthusiastic about the recent extension of allowable long combination vehicle lengths to 41 metres, which will allow for a sleeper unit. He said the current provincial government is business-friendly, which should help the province’s trucking industry weather the storm.
“Again, it’s the government that is making it quite clear to us: they want to do business, and they want to promote the economy, and we’re all for that,” said Rosseker.
Manitoba braces itself
The Manitoba Trucking Association (MTA) is not quite so optimistic about the future. The general manager of the MTA believes that 2009 is going to be very challenging.
MTA general manager Bob Dolyniuk said the province’s trucking industry has fought through two consecutive difficult years already.
“I think that given the downturn that we’ve seen in a number of industries – the economic climate and everything else that goes along with that – that we’re going to be looking towards a tough 2009,” he predicted.
Before the present economic downturn, Dolyniuk had been concerned about over-capacity in the trucking industry, which he believes is still at play.
But that may adjust as a result of the present economic climate, he said. He’s also concerned about carriers that have switched their routes as a result of changing markets, from north-south through the US, to east-west domestically. “That’s just going to put more pressure on capacity in western Canada,” he predicted.
Dolyniuk pointed out the Manitoba trucking industry has been hit with one challenge after another, including: the softwood lumber dispute; a breakout of mad cow disease; and the decline of the pulp and paper and auto industries. He said the province’s saving grace may be continued investment into Manitoba’s “inland port.”
Manitoba’s central North American location, including the inland port’s key location adjacent to the airport and both CN and CP rail lines, makes it ideal for freight movement and connections to other destinations, he said.
“Definitely, I think things are gong to start to move,” he said. “I think we have some challenges with
the US economy, but I think we also have great opportunity.”
One prominent member of the MTA, the president and CEO of Bison Transport, has just returned from a Canadian trade mission to China, along with the Premiers of Ontario, Manitoba, New Brunswick and Prince Edward Island and 110 representatives from business and education. Don Streuber saw first-hand, obvious signs of trouble in that country, with many construction sites sitting idle, empty factories, and frequent media reports about businesses declaring bankruptcy, he said.
Streuber said the trip allowed him to better understanding an economy that has delivered so much freight to North America. As for business in the New Year, Streuber remained upbeat. “We’re certainly seeing signs of an uptick towards the end of the first quarter, in terms of customer demand per truck, and looking forward to a turn that way,” he said.
As for the rest of the year, the Bison president is realistic: “Because of the recessionary conditions we’re in, it will be a recovering forecast, as opposed to a strong forecast.”