TORONTO — Shippers are more confident than they’ve been in a long time that freight volumes will recover in 2010, according to a new national survey by National Bank Financial (NBF) and the Canadian Institute of Traffic and Transportation (CITT).

The joint survey, conducted during August 2009 as a cross-sectional study of shippers as well as both truck and rail providers, gives some insight into projected volumes, pricing, overall transportation spending, service levels, and level of competition in the market.

One of the key conclusions is that transportation service providers, especially truckers, are uncertain about the rebound in industry volumes next year, while shippers appear to be more confident that 2010 will be a better year, calling for median volume growth of plus 8 percent.

Meanwhile, unlike their projection on volumes, cautious providers are quite certain about core pricing and shippers acknowledge the same (excluding fuel surcharges), projecting a flat to modest improvement (median response was 2%) next year, states the study. As expected, rails are more positive about the pricing outlook than truck fleets.

"We view the results favourably for the providers as it would appear shippers are factoring in further increases in core freight rates," says an NBF analysis.

Shipper respondents were asked about their allocation of transportation spending among domestic, cross-border and international routes. The average mix was heavily weighted towards domestic (59%), followed by transborder (26%) and international (15%), with some variations between smaller and larger shippers.

Smaller shippers had a larger international component and a smaller domestic component compared to larger shippers (21% and 57% vs. 9% and 66%, respectively). However, the transborder component was fairly similar.

Source: NBF

On the provider side, the rails and trucks were similar in their allocations, with a small international component, and domestic revenue roughly twice the size of transborder
Competition among providers of all sectors continues to heat up, however.

"While the rails and less-than-truckload carriers are managing their capacities fairly well, truckload carriers are facing more difficult conditions, given overcapacity and low barriers to entry. As a result, the rails are expected to retain the greatest pricing power upon recovery."

"… Against that backdrop, we continue to like the long-term fundamental rail story as the rails continue to exploit several critical advantages over trucks," states the report, citing price increases commensurate with improved service levels, and manage costs and capacity to reduced levels of demand, "which should position them well upon recovery."

Canadian National Railway should be among the first to recover, says NBF, "especially given many of its end markets have been depressed for longer."

The survey was completed by interviewing 146 executives, managers and support personnel at transportation service companies and shippers. The latter made up about two thirds of the respondents.